Carol M. Meyrowitz - Chief Executive Officer and Director Sherry Lang - Senior Vice President of Global Communications Scott Goldenberg - Chief Financial Officer, Executive Vice President and Principal Accounting Officer Ernie L. Herrman - President

Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division Jennifer M. Davis - Lazard Capital Markets LLC, Research Division Paul Lejuez - Nomura Securities Co. Ltd., Research Division Brian J. Tunick - JP Morgan Chase & Co, Research Division Adrianne Shapira - Goldman Sachs Group Inc., Research Division Kimberly C. Greenberger - Morgan Stanley, Research Division Jeffrey S. Stein - Northcoast Research Omar Saad - ISI Group Inc., Research Division Howard Tubin - RBC Capital Markets, LLC, Research Division David Weiner - Deutsche Bank AG, Research Division Roxanne Meyer - UBS Investment Bank, Research Division Mark K. Montagna - Avondale Partners, LLC, Research Division David J. Glick - The Buckingham Research Group Incorporated Marni Shapiro - The Retail Tracker Laura A. Champine - Canaccord Genuity, Research Division

Ladies and gentlemen, thank you for standing by. Welcome to the TJX Companies First Quarter Fiscal 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, Tuesday, May 15, 2012. I would like to turn the conference call over to Ms. Carol Meyrowitz, Chief Executive Officer of the TJX Companies, Inc. Please go ahead, ma'am.

Good morning, everyone. And before we begin, Sherry has a few words.

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 March 27, 2012. 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. Unless otherwise indicated, the adjusted numbers we refer to in today's remarks exclude the impact of the A.J. Wright consolidation in the first quarter of fiscal 2012. 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 back to Carol.

So good morning again. And joining me and Sherry on the call are Ernie Herrman and Scott Goldenberg. Scott, who, as you know, was promoted to CFO earlier this year, will be reviewing the financial results and answering the financial questions on today's call and going forward. Jeff will be continuing in his current role as Chief Administrative Officer, focusing a bit more of his time on long-term strategies. So let me begin by saying, I'm extremely pleased with our first quarter performance. Consolidated comps increased 8% on an adjusted basis. Earnings per share grew 41% over last year. It is great to see our strong performance continue and be so broad-based with all of our divisions delivering excellent results in the U.S., Canada and Europe. We saw significant increases in customer traffic in the first quarter over last year. We believe this speaks to our wide customer demographic reach, our values and merchandise mix being right. We are convinced value remains a top priority across the board, and we continue to strive to raise the bar on offering the right fashions and right brands at the right prices. As proud as I am of our first quarter, our focus remains on execution and doing a better job in every area of our business to drive sales and margins. We have many exciting growth opportunities and are convinced as ever we can grow TJX to be a $40-billion company and beyond. But before I continue, I'll turn the call over to Scott to recap our first quarter results.

Thanks, Carol, and good morning everyone. Before I begin, I just want to say how excited I am to be in my new role. As Sherry noted at the top of the call, unless otherwise indicated, the adjusted numbers we refer to in today's remarks exclude the impact of the A.J. Wright consolidation in the first quarter of fiscal '12. Now to recap first quarter fiscal 2013 results. Net sales reached $5.8 billion, an 11% increase over last year. Consolidated comparable store sales were up a very strong 8%. As Carol mentioned, significant increases in customer traffic drove this growth, with average ticket slightly up. Diluted earnings per share were $0.55, a 41% increase over last year's adjusted $0.39 per share and well above our original guidance of $0.45 to $0.47. Foreign currency rates had a positive impact on year-over-year comparisons with a $0.01 negative impact on earnings per share this quarter versus last year's $0.02 negative impact, primarily related to mark-to-market adjustments on our inventory-related hedges. I should note that the $0.01 negative impact this year was not contemplated in our original guidance. The consolidated pretax profit margin was 11.8% for the quarter, well above our expectations and up 220 basis points over last year's adjusted margin. Strong flow-through of our above-plan sales to the bottom line drove the large majority of this increase, with 40 basis points due to the positive FX impact I just discussed. With a comp of 8%, we would typically expect pretax margin improvement of 120 basis points. In the first quarter, excluding the impact of FX, pretax margins improved 180 basis points, with almost half of the increase from merchandise margins. Gross profit margin was up significantly, 130 basis points over last year's adjusted margin. Most of the increase was in merchandise margin,…

Thanks, Scott. The major themes I want to highlight are the strong momentum we continue to see, how we're striving to raise the bar throughout our business and our exciting growth opportunities. First, 2012 is off to a great start in all our businesses. We saw significant increase in customer traffic at every division in the first quarter over last year. While warm weather did boost demand for spring apparel, sales were still strong throughout the U.S., including regions where weather is generally less of a factor. Similarly, our comps in Europe were very powerful, despite the very unfavorable weather and challenging consumer environment in the U.K. We believe this speaks to the importance of value to the consumers and our exciting merchandise selections. We are convinced that we will continue to attract new customers to our stores. Now to highlight our divisional performance. Our U.S. divisions delivered outstanding results in the first quarter. Marmaxx comped up 8% over growth over 4% last year and 10% the year before that. HomeGoods comp sales increased 9% in the first quarter, over 6% and 15% increases in the past 2 years, respectively. With above-plan sales and strong flow-through to the bottom line, both of these divisions delivered record first quarter profit segment and segment profit margins. Our international businesses achieved excellent results. TJX Europe delivered its highest first quarter segment profit in the history of this division. Comps increased by a very strong 13%, and segment profit increased 700 basis points. We were particularly pleased with the broad-based strength in our European businesses from the U.K. and Ireland, Germany and Poland. Even more encouraging than the continuation of strong trends in TJX Europe is that we see lots of room for further improvement. At TJX Canada, comps increased 6% and segment profit…

Thanks, Carol. Now to fiscal '13 guidance, beginning with the full year. We are raising our outlook for full year earnings per share to be in the range of $2.27 to $2.37, which represents a 14% to 19% increase over the adjusted $1.99 last year. As a reminder, this guidance includes a 53rd week in the fiscal '13 calendar, which we will -- which we expect will benefit the year and fourth quarter by approximately $0.07 per share. On a 52-week basis, excluding the $0.07 benefit, full year EPS would be $2.20 to $2.30, up 11% to 16 % over the adjusted $1.99 in fiscal '12. 4 Let me recap the key changes versus the guidance we provided on the February earnings call. We now estimate consolidated comp store sales growth of 2% to 3% for the full year compared to our original guidance of 1% to 2%. We also expect pretax margins of 11.1% to 11.5%, which is 20 to 30 basis points above our original guidance and 40 to 80 basis points higher than last year's adjusted margin of 10.7%. This excluded 30 basis points from the negative impact of the A.J. Wright consolidation versus the reported margin of 10.4%. Now to Q2 guidance. We expect earnings per share to be in the range of $0.47 to $0.50, a 4% to 11% increase over last year's $0.45 per share. We're assuming a second quarter top line in the $5.7 billion to $5.8 billion range. This is based upon comp sales growth in the 2% to 4% range both on a consolidated basis and at The Marmaxx Group. Now to monthly comps. With May off to a strong start, we are planning comp sales to increase approximately 5% for the month on a consolidated basis and at The Marmaxx…

[Operator Instructions] Our first question today is from Richard Jaffe. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: A question about marketing and ad spend for the balance of the year, wondering how you see it might play out in terms of investment on TV versus print versus new media, electronic and social media, and then if you could help us understand the dollars, the increased investment that you think you'll be spending. And then just a quick question for Scott about debt.

You know what, I may ask you to repeat some things because it's very low. I think you asked about marketing ad spending to the back of the year and a breakdown of how we're spending that, the investments. And what was the third? Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: I just have a question for Scott about debt.

Debt, okay. We're having a hard time, I don't know what's going on. But we'll do our best here. [Technical Difficulty] In terms of the marketing spend, our marketing spend is pretty flat. However, our impressions are up as we're leveraging all of our corporate marketing initiatives, you're going to see it's a lot more in the back half. So I feel like we're really, really doing a terrific job of leveraging. As last year, we've really kicked it up for our gift giving in fourth quarter. And I think this year, we're going to have a really fantastic campaign, so we're excited about that. We don't give -- we don't break down how we're spending social networking versus how we're communicating to the customer. And quite frankly, that's something we keep a little bit private. In terms of our investment for the year, I'll have Scott go through it, but we are on plan. It's -- we have a little bit of an increase in the second quarter, which is timing. But to the year, our investments are right on plan, including all of the elements we've talked about from supply chain to e-commerce to the office to the infrastructure. So we have a little bit of a timing. And then, Scott, I think the other question was on debt. So Rich, could you just -- can you just repeat the last question, I apologize. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: Oh, sure. Just looking at the relatively small amount of debt that TJX has, wondering if Scott has any expectations of putting more debt on the balance sheet and leveraging up the company a bit?

Okay.

Hey, Richard, I think in terms of our long-term debt, as you know, we have $775 million, with nothing coming due in the at least short term. We have no plans at this point in time. We enjoy our financial flexibility that we have. Having said that, we will always keep ourself open for what we'll do in the future. But what I think the major factor right now is keeping the financial flexibility.

Our next question is from Jennifer Davis. [Technical Difficulty]

I was wondering if you could -- if there was any way you could see how much of the increases in traffic is being driven by new customers? And then also, your increase in segment margins at Marmaxx is very impressive. Just wondering how much of the margin benefit or how much of that is coming from stores that are in more moderate income areas or how much of that is just overall strength across the chain?

Yes, absolutely across the board and that includes new stores and old stores, so we're really pleased. I mean, it's straight across the country and in all demographics. In terms of the traffic, we analyzed that, and we are seeing new customers in that our average age is decreasing a little bit and a large percent of our new customers are younger customers. But I don't have the exact percentages, but a lot of the traffic is new customers.

Our next question is from Paul Lejuez.

So you spoke of expanding the global sourcing organization. I'm just wondering where do you stand now in terms of number of buying offices throughout the world? What's your goal? Maybe if you put that in terms of number of buyers, where are you today and where are you going? And I think maybe related to that, just thinking about T.K. business, can you maybe talk about how much inventory is being sourced from within Europe for that business and how that's changed over the past year and how that might be likely to change?

Okay, well in terms of the stores sourcing, I mean that is our secret sauce. But a very high percent of our sourcing is done in Europe, and it is very specific by country. So we have really learned what the mix needs to be by country. In terms of our merchants, we keep needing -- adding offices. And again, we're not going to discuss the countries that we're going to be adding people in, but what we're trying to do is obviously make a very unique, exciting assortment. So when you look at HomeGoods, we're in countries that you would never expect us to be in. But it's all about the excitement. We talked about 700 people in our merchandising organization. We're continuing to grow that. We have a huge, huge training program. We bring in hundreds of kids each year, and that's being built -- we're putting a lot into our bench strength and infrastructure because that is what's going to make us really special to the future. But in the end, it's the sourcing and it's our vendor relationships that make us special.

Carol, how many offices do you have now around the world, from a sourcing perspective?

I don't know what the number is because we have Australia. We have India. We have...

It's more like, I would say, like 6 or 7 main ones.

Main ones, yes. And then we have plant satellite offices.

A few satellites. We try not to get specific. They're not as meaningful. Some of smaller ones, but we do have this coverage and it flexes. Sometimes, we flex with the smaller offices in terms of how many people are there. Yes, we do.

So is the growth in the number -- where are you growing? Will you be growing the number of satellite offices, primary offices, just number of buyers within each office? Just trying to think of where the growth comes from.

Paul, I would say it's a little of both. But really some of the growth is, we've already positioned these other hub offices, I would call them, in places we're happy. So the growth is actually happening in those satellite -- the current offices and a little less so really in opening more satellite offices. So I would say, the growth is more in our current offices.

Paul, in addition to that, our guys travel constantly. So a big, big piece of our sourcing is not just people being on the ground but groups traveling quite a bit together. I mean, a buyer's life here is a lot of travel.

Our next question is from Brian Tunick. Brian J. Tunick - JP Morgan Chase & Co, Research Division: I guess, our question really was around the T.K. business around Europe. So just trying to understand a little more, maybe talk through the improvement despite the economic pressures there. So I know you've made a lot of your own internal changes. You can maybe update us there. But on the external side, where is the market share coming from and where do you see sort of a normalized growth rate from a store perspective coming out of T.K. now that the business has turned? And in what parts of Europe should we expect to look for the growth to come from?

Okay, well, first of all, we -- I'm going to put the economy aside because we always believe that it has nothing to do with the economy, it has to do with our execution. And I think you got to remember that we're really the only off-price vehicle in Europe. So I'm going to come back to it's all about our execution. The highest -- Europe has been over 7%. I think we're certainly making headway, and Scott will go through what we're thinking for the year for Europe. We don't know what the end game is. I can only tell you that we have a long way to go, and I think both Ernie and I feel there's tremendous opportunity there. We're happy with what we're accomplishing. I think we still have a long way to go. I would not sit here and say that we're there and everything is perfect. It's far from it. We've learned a tremendous amount. So I don't know what the endgame is. Ernie, you want to comment on...

Yes, Brian, I think a couple of things we feel much better about in Europe are that the people overall, the merchants and the field organizations are more seasoned than they were a year ago. So that's been a big plus, and that's been a mission. We put in place a couple of additional training people to help with that. As Carol mentioned earlier, even on other businesses, our secret sauce is the way we buy goods. And so we have really ramped up the way we are going to train our younger merchants there and bring them onboard. When we had the dramatic growth we talked about this before on the calls and when we had the dramatic growth earlier; we had a little bit of strain on the organization in that respect. I feel much better about the way we're positioned now in terms of the -- again, the experience of the people and the management and the training programs we have in place to keep those people on track. And we're back on, certainly, I would say, in that environment on delivering the better value to the stores, which is how we're capturing, I think, market share in those environments just like we did in the states when that happened. So where is it coming from? I guess we don't concentrate too much on that as much as we expect when we deliver the right value and stick to the core fundamentals of the off-price business, that we will capture that incremental market share. So we're feeling better.

So Brian, our traffic is very high. We have very high increases in our traffic patterns right now in Europe. And very similar to Marmaxx, it's going to be interesting. As we get better at our mix and better at understanding the customer, my guess is we have more and more opportunity to increase our store count. So obviously, we're not going to do it today, but we are taking advantage of the real estate opportunities that we're seeing because it is pretty substantial right now. But again, as we get better, we really don't know where that endgame is. I suspect it's probably greater than what we think it is today. Scott, you want to give the full year numbers for Europe?

Sure. For the full year, we're now guiding Europe to a 5.2% to 5.8% segment margin. Segment margin again, 5.2% to 5.8%, just went up, pause for a second, say that, that's -- these numbers are on a 53-week basis. That's a 280 to 340 basis points improvement over last year on a 4 to 5 comp. And again, an improvement over our original guidance for Europe, which was 4.9% to 5.4%. So embedded in these numbers for the last 9 months for Europe is a segment margin of 6.2% to 6.8% versus last year's 4.4% on a 2 to 3 comp. So just again a reminder, going back a few years, our segment margin profit for Europe was as high as 7.2%. So we're making progress to reach that level again and then hopefully exceed it, and we're pleased with the current momentum that we now see in Europe.

However, I don't think there are any -- or I would be happy with these comps. So hopefully, we'll beat them.

And our next question is from Adrianne Shapira.

Maybe I understand your -- the online plans are you're keeping it close to the vest understandably, exactly. But if you could share what learnings you're finding in the early European online efforts? If you can share with us what you're seeing in offline there and what gives you confidence in terms of how to translate those learnings in the U.S.?

It's certainly teaching us categories. It's teaching us how to work in the off-price sector, which is a little bit different. But we are understand -- we are learning about the customer. We're learning about average order. We're learning about number of in-baskets. We're learning about communication. So the fact that we started in Europe has been terrific. And again, I'm not going to share my secret sauce, but Ernie has done some very interesting things over there. And their e-commerce business is getting stronger and stronger.

And Carol, could you give us a little bit more specifics in terms of the type of growth, the type of traffic, the type of spend that you're seeing online in Europe?

Of course not. I'm sorry, Adrianne. Probably when we do launch, we're going to be very happy. And that's our goal, that we feel really good about what we're launching.

All right. So let me squeeze in one more then. The Marmaxx comps, obviously spectacular. We're obviously seeing a lot of shift from the competitive landscape, especially across the mid-tier department stores. Maybe talk about what you're doing, anything, I know not differently, but opportunities that you're looking to seize as some share shifts are coming -- shares is coming up for grabs in the mid-tier?

I just think that we're focusing on doing a better job of what we do every day. The market is absolutely loaded. We're very particular. I think we're building our relationships. And I think, to me, I always look at how special our stores look, and I'm proud of our stores. I think there's still room to bring our inventories down. I think there's still room for more freshness. I think there's still lots of room for improvement. But I always measure it and say, "Do we look better than we looked a quarter ago? Do we look better than we looked a year ago?" And that's really how we look at our business.

Our next question is from Kimberly Greenberger.

Carol, the segment margins just across all of your businesses, Marmaxx, Canada and HomeGoods are hitting new record highs. And I'm wondering if there's anything standing in your way of delivering similarly record-high margins throughout the rest of the year. Are there any factors that we should keep in mind, out of thinking about the opportunity for upside as we progress through the year?

Well, as you know, we're planning our comps conservatively. If you look at the back half, the last 9 months, for every comp, it's about $0.05. For the back half the last 6 months, for every comp, we're looking at $0.02 to $0.03. We like the plan conservatively. Ernie and I want very much to beat our plans, and that's what we've strive for. And it's all about execution. So it's execution. I think there's still have room, as I said before, to decrease our inventory level. But it's just doing a better job everyday. So we think we have good conservative numbers in the back half, and we won't be happy if we don't beat them.

Great. That's very helpful, Carol. And I just wanted to follow up, Scott, on one of your comments on the call. You mentioned a 180 basis-point increase, I think, in the operating margin here in the first quarter, with almost half due to the increased merchandise margin. I'm getting more like a 220 basis-point increase in the operating margin here in Q1. I'm wondering if there -- what the differential is, if you could help us with that?

The 220 basis points increase in margin has a 40 basis points benefit from FX. So x FX, it's the 180 basis points.

Our next question is from Jeffrey Stein.

Question, the big boxes are really having a lot of trouble selling to that millennial customer. And I'm wondering, when you speak of a younger customer, are talking about more of a junior customer? And if so, do you presently have the vendor relationships to adequately serve that customer or if that needs to be better developed?

Yes, it's really the 18 to 35 year old that we're gaining that range. So it's really right in the sweet spot of where you want the future consumer to be. And obviously, we're keeping our older customer, the Maxxinistas of the world.

And in terms of the vendor relationships to service that younger customer, do you presently feel that you've got those relationship in place...

We feel very good about it, yes. Very good.

Our next question is from Omar Saad.

I wanted to see if you guys could give an example or maybe some anecdotes in the business. From either the fashion trends that you're seeing and your being able to respond to so well given the flexibility and scale of your supply chain or the weather trends have been a little bit uneven the last several months. Can you talk about how the supply chain works in your favor in those situations and maybe help give us some color around that?

Well, as I said, we're really strong across the board. Both apparel and home has been really terrific. I think there's tremendous color changes this year. I think we're feeling pretty good about the fashion. But Ernie will tell you, men's, kid's, it's really strong across the board.

It has been. And I think one of the -- I think you're asking about how does it tie in to the model and the way we operate. The advantage to this model, and we talked about it before, is the flexibility and the close-ins tying it, it allows our buyers to capitalize on fashion trends or even weather trends. So if the weather is working one way or another, it can create opportunities in the marketplace for us to get goods at a different or a better value. In terms of the fashion, we're able to read products. We're north, south, everywhere in the states, so we can read products and buy close-in purchases and still take advantage of those fashion trends in all the different fashion areas of the company. And interestingly enough, that happens to be a place that Carol and I have talked about as an opportunity for the back half here and just to do a little bit better job in our fashion areas. But the model plays well in allowing us to do that.

It's a very good weather-proofing model, and that's a different way to look at it. It mitigates the risk factor.

It really does.

And our next question is from Howard Tubin.

When looking at maybe comps for the rest of the year, do you think the majority of comp improvement is going to continue to be driven by traffic increases or maybe will we get some out of average ticket? What are your plans for average ticket going forward?

It's going to be slightly up, but most of it should come from traffic. And again, remember, we are planning our comps flat to 1%. So we're betting on beating that, and I think we have some great plans in terms of our marketing and our mix to drive that. But it's going to be mostly traffic, slightly in tickets.

Our next question is from David Weiner.

So just picking up on kind of the theme of the call, it seems to be Europe largely. So I'm just looking at your Analyst Day in October last year and I think the long-term segment margin potential guidance that you gave for each of the individual segments. So at the time -- and maybe these have changed internally, but at that time, it looks like Marmaxx had kind of -- you were thinking that Marmaxx could have a couple 100 basis points larger -- greater potential than Europe over time. I guess my question is, as you move further into Europe and you start to integrate the online business there, is there anything structurally that you can foresee that over time would prevent you from getting margin parity there to the Marmaxx business here in the U.S.?

Well, some of it is going to depend on the real estate because that's certainly was a big chunk in the past, so that remains to be seen. It's going to depend on the combination of pan-European and leveraging. So as I said before, we're not sure how high is high. I think we're going to learn more over the next several years. Scott, you have a...

I think, David, the one thing, there's nothing structurally in the store expenses and margin that Carol was talking about. I think it's just getting to the size of the Marmaxx business with the almost 2,000 stores where you're getting that leverage. I think that's the only -- that's the fundamental difference. But everything else in Europe, as we've stated, other than merchandising is that we're leveraging behind the scenes, distribution, et cetera.

[indiscernible] 875-store mark within the countries we're in so, again, that remains to be seen. If that number increases within the countries that we're in or neighboring countries then, again, that will change.

Right. Okay, so that makes sense. Certainly, the store size leverage makes sense. But I guess, how about from just a pure-pricing perspective for -- on comparable product? If you think about it that way, is there an opportunity there to maybe charge a little bit higher than you would here in the states?

No, we create value.

Yes, we were about to answer the question.

Or it's something like that, so go ahead.

David, we're always very cognizant here value as we are here on what the out-the-door value is relative to all the competition. So we never -- that will always determine that. We weren't just saying, we can get this for our retail. Having said that, that would be, I'll just echo what Scott said, our issue there will not be on pricing. It's more just the scale, I think, of the whole business. And as Carol alluded to, we don't know but we are -- again, as you can see, we are on the track now where we can start to look for real estate opportunities down the road here.

But certainly exciting is the fact that real estate is a lot less than it was many years ago.

Right.

Yes, for sure. And your location qualities have been pretty good so -- if not, very good.

Our next question is from Roxanne Meyer.

I just want to follow up on Europe. Are you able to provide us even qualitatively how -- what the performance has been like among the regions, among Germany, Poland versus the U.K.? And what role, if any, tourism is playing in each of those markets?

No, we really don't break it down, the same thing in Canada. So we -- I really -- I can't break it down for you. We do it as a total segment.

Okay. And then are you able to share, when you think about the back half year, your guidance to leverage SG&A on a flat to 1% comp, what factors are allowing you to do that in this back half?

Scott?

Sure. Let me give you just some color in terms of corporate expenses and expenses in general. Corporate expenses were up $13 million in the first quarter. They're planned to be up approximately $20 million in the second quarter. And that, again, as we've talked about in the script today, the largest increase, with the majority of that increase due to investment spending. If we break the year into the first and second half; the first half increases are in the $30 million to $33 million range, with the back half a little less than $10 million. So we've had as I stated earlier, fundamentally no change to our annual spending for corporate expenses since we originally gave guidance. So really, it's all about timing related to the spend. And as we've, I think, talked about earlier, most of the investment spending is reflected in the corporate expenses. So in the back half, we're able to leverage this, as we've stated, on the 0 to 1 comp, that we're able to leverage our SG&A slightly. And as we mentioned, I think we've talked a little bit about before, as we move further on, going even past the second half of this year, we expect our incremental investments to level off in fiscal '14 and beyond. So I think it's a timing issue and, again, at the leveraging in the back half of the year on that 0 to 1 comp.

Our next question is from Mark Montagna.

Question just about, when you are talking about the movement of stores into the rural and urban areas, wondering of the 2,300 to 2,400 stores that you talked about for Marmaxx, what percentage of those are you factoring as these more rural- and urban-type stores? And then, the second question just dealing with traffic. first quarter traffic was up a lot. Is that a bigger traffic increase this year in the first quarter compared to last year's first quarter traffic increase?

It's pretty much been running consistently, year-over-year and quarter-over-quarter. Right, Scott?

Yes. I don't have that right in front of me. Maybe I'll get back to you.

I think the 3-year trend was the high-teens, and the quarterly trend is pretty similar to that, Mark. Yes, in terms of -- we don't have the numbers on the rural -- on a breakdown of all the stores within Marmaxx, and we don't usually break that down. But I can tell you that, again, as we go into the rural areas, we're finding that we, again, see more and more possibilities for additional stores. You got to remember that even our $4 million and $5 million stores make tons of money for us. So that's what we're finding more exciting. However, I'll keep coming back to we're learning, and I believe we can still do a better job at targeting the stores, the right goods, the right stores and still bringing our inventories down a bit.

Okay. When looking at, say, the rural locations and more of the urban locations, do you think you have a chance with HomeGoods to go into the rural locations or the more urban?

Yes, we do. And Scott has a point too, on the rural. Yes, you want...

I just -- a point on the rural stores. The volumes are less than the chain average, but the quality of the margin that we get in those stores is equal to the chain average we are quite good in those.

And so that's why your leveraging just keeps coming in, especially in the Marmaxx chain and, hopefully, HomeGoods will be doing the same.

Our next question is from David Glick.

Some interesting comments, Carol, about the progress you're making in that 18- to 35-year old customer. I'm wondering what you're attributing that gain in market share to from a marketing perspective? Do you think it's more your broadcast TV or maybe some things you're doing from a digital perspective? And does it lead you to kind of rethink your mix of marketing spend going forward?

I think in the end, it really comes down to mix. You know how viral things are and word-of-mouth. And I listen to the kids, and they talk about us now. And years ago, you didn't hear as many young people talking about us, and we're kind of a cool place to go now. So I think it's very different. And I think that's, again, what Ernie and I keep working on is making that better and better every day.

Our next question is from Marni Shapiro.

And I don't want to add to many questions. I'm going to ask one simple one. Are you seeing anything new and different at HomeGoods that's making it really power up all of a sudden or is it just steady as it goes and excellent execution on the buying?

We're going to answer that by saying, yes, everyday. I mean, seriously, their mix and their freshness, they're such an exciting store. I filled up my trunk last week, and I have to stop doing that because my husband is going be furious with me.

I keep purging my closet so I can keep buying more. Are you seeing the same 18 to 35 year old in HomeGoods that you're seeing at TJ's?

We aren’t -- yes, we’re starting to see a younger customer, and it's a great vehicle for young people who are starting out and getting their first apartment. We've seen some amazing things. People coming in with u-hauls and trucks, and it's absolutely fascinating. But it's a fun, fun brand. It really is.

And our final question today is from Laura Champine.

And I appreciate your comments, Carol, about how your performance in Europe will be determined by your own execution and not the macroeconomic environment. But have you thought about where the stress points are and how bad things could get that would keep you from hitting those margin goals? And maybe conversely to that, do you actually perform better if the economy is weaker in Europe? What's your opinion on that front?

No, no, because obviously in the past, we've performed very well when we execute. I don't -- look, Europe is pretty bad right now. If you look at Ireland and you look at outside of London, the economies are -- it's pretty devastating, and we're performing pretty well. So again, I don't think we -- I keep coming back to execution. I just keep coming back to that. And whether it's a good economy or a bad economy, if we do our job, we do well. Thank you, everyone, and we look forward to reporting our second quarter to you. Thanks.

And ladies and gentlemen, that concludes your conference call for today. You may all disconnect. Thank you for participating.

Thanks a lot.