Ladies and gentlemen, thank you for standing by. And welcome to The TJX Companies’ Second Quarter Fiscal 2017 Financial Results Conference Call. At this time, all participants are in listen-only mode. And later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded, Tuesday, August 16, 2016. And now I’d like to turn the call over to Mr. Ernie Hermann, Chief Executive Officer and President of TJX Companies, Incorporated. Please go ahead, sir.

Thank you, Jim. Before we begin, Deb has some opening 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 March 29, 2016. Further, these comments and the Q&A that follows are copyrighted today by The TJX Companies Inc. 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 in our international divisions in today’s press release and the Investor Information section of our website, tjx.com. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are posted on our website, tjx.com, in the Investor Information section. Thank you. And now I’ll turn it back over to Ernie.

Good morning. Joining me and Deb on the call is Scott Goldenberg. Let me begin by saying that I’m very pleased with our second quarter results. Consolidated comp-store sales grew a strong 4% over a 6% increase last year and above our plan. This marks the 30th consecutive quarter of comp growth for TJX. We are thrilled that the comp was once again driven almost entirely by customer traffic. This is also the seventh consecutive quarter that traffic was the primary driver of our comp increase. In addition, it was great to see the traffic was the primary driver of the comp increases at all four major divisions as our great brands, amazing values and eclectic merchandise mix keep resonating with consumers. We are convinced that we are attracting new customers, driving more frequent visits to our stores and gaining market share. Further, we are pleased with the strong performance across our apparel areas, including accessories and home businesses. Earnings per share increased 5%, well above our expectations and over a strong increase last year. We achieved these results despite significant headwinds from wage increases and investments to support our growth. Further, we were extremely pleased with our strong merchandise margin increase despite a significant impact from transactional foreign exchange. Our results once again demonstrate the power of our flexible business model and our ability to execute across many different retail environments. With our strong second quarter performance, we are raising our full-year comp and EPS guidance. Looking ahead, the third quarter is off to a solid start, and we have many initiatives planned for the back half of the year to keep driving traffic and sales. We are confident we will achieve our goals and as always, our management team will strive to surpass them. We see many near and long-term opportunities for growth and are well on our way to growing TJX to a $40 billion-plus company. Before I continue, I’ll turn the call over to Scott to recap our second quarter numbers.

Thanks, Ernie, and good morning, everyone. As Ernie mentioned, our second quarter consolidated comparable store sales increased 4% over last year’s 6% growth, which was above our plan. I want to note that this reflects the comp growth in our brick-and-mortar stores and excludes our e-commerce businesses. We were very pleased that customer traffic was the primary driver of our comp increases at every division again this quarter. It was also great to see an increase in our units sold for another consecutive quarter. Average ticket decreased slightly more than planned. Diluted earnings per share were $0.84, a 5% increase over last year’s $0.80 and well above our plan. As expected, our EPS growth was negatively impacted by approximately 3% due to wage increases. The impact of foreign currency and transactional foreign exchange had a neutral impact to EPS growth versus our expectation of a 2% negative impact. Consolidated pretax profit margin was 11.6%, down 40 basis points versus the prior year and significantly better than we planned. Gross profit margin was 29.4%, up 30 basis points versus last year and significantly better than we planned. This was primarily due to a strong increase in merchandise margins and gains on our inventory hedges. SG&A expense as a percentage of sales was 17.7%, up 80 basis points versus last year’s ratio. This increase was primarily due to wage increases and investments to support our growth, as we had planned. At the end of the second quarter, consolidated inventories on a per-store basis, including inventories held in warehouses, but excluding in-transit and e-commerce inventories, were flat on a constant currency basis. We are very pleased with our lean inventory position entering the third quarter as we are set up extremely well to flow fresh goods to our stores throughout the back half…

Thanks, Scott. I’ll begin by reiterating our key strengths, which give us great confidence. We believe these strengths not only differentiate TJX from most other major retailers, but also position us for continued success, particularly in today’s retail environment. First, we are a global sourcing machine, a world-class buying organization, has more than 1,000 associates seeking the best merchandise from the universe of more than 18,000 vendors in over 100 countries. We are extremely proud of the depth, experience, and longevity of our buying teams, which we are convinced, is a major TJX advantage. Second, our global supply chain distribution network and proprietary systems have been built and refined to support our global off-price business model. The flexibility of our global infrastructure allows us to adjust the merchandise flow to our stores and respond rapidly to changing consumer and market trends. We believe this is a key advantage in any retail environment. Next, we are leveraging our global presence and expertise. Our four major divisions operate as one TJX across nine countries and three continents and are highly integrated and synergistic. We have a culture where associates are encouraged to share ideas, initiatives, and best practices that can be leveraged across our businesses. All of these factors that differentiate TJX enable us to deliver amazing value to consumers. Value has been the mission of our Company since day one. We are confident that offering consumers quality, branded merchandise at great values will continue to attract more U.S. and international shoppers to our stores. Now, I will briefly recap our three major growth drivers. Our number one initiative remains driving customer traffic and comp sales. Our results tell us that our strategies and initiatives are working. We are even more excited about the opportunity we see to capture additional market share…

Thanks, Ernie. Before I begin, I want to briefly talk to the implication of Brexit for us going forward. We continue to monitor the situation very closely, including how we may need to adapt to comply with potential changes such as new regulations or requirements. We remain as confident as ever in the strength and growth prospects of our European business. Further, we are convinced that the flexibility of our business model will continue to serve us well and allow us to gain market share and capitalize on the off-price buying opportunities that disruptions in the marketplace tend to create. Now to fiscal 2017 guidance, beginning with the full-year. As we stated in our press release this morning, we recently offered eligible former TJX associates who have not yet commenced their pension benefit an opportunity to receive a lump-sum payout of their vested pension benefit. We anticipate that the impact of this pension payout, primarily a non-cash settlement charge, could negatively impact fiscal 2017 EPS by approximately $0.03 to $0.05, but could be higher or lower depending on participation rates and other factors. To be clear, all of the guidance we are providing today excludes the potential impact of this pension payout offer. Further, we plan to present adjusted results in the third quarter that will exclude its potential impact. Moving on as Ernie mentioned, we are raising our full-year diluted earnings per share guidance to reflect our above-plan second quarter. We now expect fiscal 2017 earnings per share to be in the range of $3.39 to $3.43, which would be up 2% to 3% versus $3.33 in fiscal 2016. As a reminder, our plans assume a negative impact to EPS growth of about 3% due to wage increases and approximately 3% due to foreign currency and transactional foreign exchange.…

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] We have a question from Kimberly Greenberger. You may ask your question.

Okay. Great. Thank you so much. Good morning and congratulations on the really solid second quarter. Ernie, my question is on the AUR. I may not be remembering correctly, but I thought last year, we’ve started to see the AUR declined in the second quarter. And it sounds like from your comments today anniversarying that, there are some incremental AUR declines. In May, when we talked about this, you indicated that the buyers are seeing really nice opportunities to actually fortify the assortment at the opening price point across categories, and that’s really been the driver. So is that still the driver here going into year two, if I’m remembering that correctly? And are there some incremental opportunities that the buyers are seeing out there across categories? Thanks.

Kimberly, good memory. Yes, we discussed that really over the last year. There’s been a lot of dynamics going on there. I would say that the average ticket situation has really been a combination and continues to be a combination. It isn’t just the buying better value. It’s also a tweaking of the mix across some departments. So some categories have been emphasized while others deemphasized and some departments and so happens that in some of those areas, the average ticket is lower. And since we have brought them up driven, and I think we did talk about that before as well with you guys, we don’t top-down manage that process. The buyers really drive the bus on that. And so what happens is some of our other businesses and that are trending happened to have lower average ticket and as we chase them, that lowers the total average ticket in the store down. Having said that, it has moderated from where we were a year ago, and we actually thought at this point, we’d be a little bit more moderated, but it is still leveling off from where it was six months ago. So we’re pretty happy with that. To your second question about the opportunities out there, and I guess, you’re getting out just in general, right? Is that you’re not just referring to certain opportunities at certain average tickets, right?

In general.

In general. Well and we kind of put this in the script, and it’s something we don’t like too many specifics on, but the markets have an exceptional amount of goods. The markets always have a lot of goods. So we just right now, I would say have had to be very diligent on holding back our buyers and not buying too soon. We always have to do that. I would say that we probably had a ramp that effort up a little more strongly than we have in the past only because of the environment out there is yielding a little bit more than we typically would see, especially at this time period. Right now, it’s not exactly the time period you would see so much, but there is quite a bit out there. So yes, a lot of opportunities in it not one area, not one price zone, not like moderate or better, a little bit across the board. And so one thing we’ve strategically done is we leaned up our inventories to more of a flat level so that we could take advantage of this marketplace. Because the marketplace is so flushed with goods, we thought it was a good time to actually lean up our inventories a little bit more than we had been running. So that’s one reason you saw a little shift there where even a little bit more liquid than we were three months or six months ago.

Fantastic good luck for the second half.

Thank you, Kimberly.

Our next question comes from Ike Boruchow. You may ask your question.

Hi, good morning, everyone. Let me add my congratulations on the quarter.

Thank you.

I guess, my question is you clearly have some big investments you talked about in the call today around new DCs and supply chain that continue to take shape. And there is ongoing headwinds around wages that you’ll need to plan for as well. So when you look at some - maybe some of the money losing areas of the business today, and I’m assuming online falls in that bucket, do you internally discuss what strategies may not be as compelling as they may have looked several years ago or maybe you didn’t understand what kind of expense pressures loomed here in 2016, 2017, 2018?

Yes, Ike, let me jump in, and I think Scott will probably jump in right after. You make a great – it’s interesting what you’re asking is somewhat of a question, somewhat of a statement. When you think about how we handle e-com and to your point, e-com, and I think we said it many, many times, it’s a relatively small portion of our business. And we specifically, under the heading of what you’re really kind of talking about is looking at it in the total. We look at the opportunity, we weigh out the effort involved and certainly, the expense or profitability involved. And we say we want to take it step-by-step. And that is what we have done with our e-com business really to your question/statement. And Scott, I don’t know if you have anything to add there, but that’s really strategically how we look at that piece of the business and it would fall under the heading, I think you were talking about is something that you don’t feel too heavily. Although we’re happy with the way it’s going.

Yes, as Ernie, I think, has said before that primary driver with us opening up almost 200 stores this year and hopefully more than that in the future, that’s going to be the primary driver of our incremental sales growth and the comp growth on our existing base. Having said that, as Ernie said, we’re pleased with a lot of the metrics and the sales growth we see at tkmaxx.com and tjmaxx.com we like our conversion, our average order value, a lot of what we see the adding of categories, vendors, et cetera. So I think we’ve said that before and we’re investing proportionately on our $1 billion plus capital. We’re spending money, but it’s proportionate to the size of the business. So I think that’s all I have to add.

Great. Thanks.

Thank you.

Our next question comes from Paul Lejuez. You may ask you question.

Hey, thanks guys. Hey Macy’s closing 100 stores at the end of this year. Just curious what that means to you guys - clearing through inventory as those stores do close down versus the market share opportunity potential for you guys next year. How are you thinking about it? And what have you seen in the last class of Macy’s stores that have closed. And I’m just curious if you do anything from a marketing perspective in those markets? Thanks.

Paul, good question, clearly, an indicator of the times that we’re in and the environment that’s out there, we don’t like to comment specifically on another retailer or what’s going on there. Under our big heading, you heard us talk about gaining market share numerous times throughout our call. That is still our focus. We believe any of the uneasiness that’s happening or any of the store closures not just Macy’s, anywhere across the board in this market. And there’s been a fair amount announced this year in FY 2017, let alone in FY 2016. And I think it’s what you’re getting at. We believe there’s market share – additional market share opportunities for us. We don’t really watch the actual closing effects as much and what that does in the nearby locations because it’s temporary, so we tend to be more long-term oriented. But clearly, there’s some uneasiness and some changing dynamics with all the store closures that are going on domestically and internationally, by the way. So we look at what’s happening domestically. And there’s far beyond just Macy’s. Scott?

Yes, I think a couple of points, as Ernie – I mean, in addition to Macy’s, I mean, it’s been between all - the close to 2,000 stores that are going to be closing Macy’s. The Macy stores that they announced last year, the 35 to 40, as Ernie said, just to put this in context when we were asked over previous years with other retailers. I’m sure we’re getting our fair share from other retailers, but when other retailers comps have gone up and down, I don’t think it’s the primary driver of the comp increase that we’re getting. But I do think, as Ernie said, it does pertain well for us, not necessarily per se Macy’s, but the real estate environment as other retailers both – as Ernie indicated both in Europe and the U.S. too, feel confident in our store openings that we’ve talked about and hopefully even more in the future.

Yes. To that point, by the way, it’s a little bit of a tangent, but when we look at the Europe environment, and Scott was just touching on it, we feel like there are real estate opportunities for acquiring real estate sites as well as merchandising and sales, market share opportunity. So that’s another interesting dynamic that will take place.

Thanks, guys. Good luck.

Thank you.

Our next question comes from Mike Baker. You may ask your question.

Thanks, guys. I want to ask about the trend of the business through the quarter. Can you talk about how that played out? And one thing if you look at is the gap between your comps and department stores and while you guys are clearly taking market share still that gap did narrow. I’m wondering did you see them being a little bit more promotional, just try to win back some share or anything specific to point out there? Thanks.

So Mike, on the gap narrowing, are you looking at that relatively like first quarter or...

Yes, exactly. If you just simply do your comps minus an average for some of the discount department stores and compare that gap to what it was in the first quarter, it did narrow. So I was just wondering if you could provide why you think that may have happened, were they more promotional or any other thoughts? Thanks.

I don’t know. We have a few dynamics going on. I don’t know if this is the total answer, but one thing is we were up against a six comp in the second quarter, that’s one thing. Number two, when we talked about we’ve been open about this in our first quarter, we have when we ran a seven, we had a benefit of weather, which we – that helped us by a little bit and certainly we still had a very healthy comp. And then secondly, in our second quarter, because Europe is a piece of our business, we probably would have been a point higher in comp if Europe was more normalized. So if you take into account the pre-Brexit trend we had versus post, we would have been – and Scott has to run the numbers, we would have been a five. But I don’t know if that answers you. I don’t know what numbers you’re looking at. I guess, we look at it and we still say we ran up – at the end of the day, we ran a four comp on a six comp at the 10% two-year stack, and we feel pretty good about it.

Yes. I mean, not much different than Ernie assuming, as if you somewhat normalize in the first quarter we’ve been running for the last three quarters in the – that 10% two-year stack, which we started to accelerate too, in the fourth quarter so feel good. And again, as Ernie said, in terms of the UK business, they were trending quite strongly before Brexit, extremely strongly in the regions outside of the UK. And I think as we just indicated a few minutes ago, pleased with our trends going in as we start the first quarter in our European businesses – third quarter.

Okay, thanks. And trend through the quarter by month? Can you guys give us some color there?

We don’t give that.

No, we don’t give the color on that Michael.

Okay. Thanks for the [outlook].

Thank you.

Our next question comes from Michael Binetti. You may ask your question.

Hey, guys. Good morning. Thanks for the detail today.

Good morning.

So it sounds like just listening to some of the people reporting over the last few weeks, the industry is looking at the strategy is inventories cleaner into the back half. It seems like some of your competitors are pivoting towards a lower levels of promotionality in the second half of the year. How do you see a pivot like that impacting you into the back half? And maybe what kind of traffic are you baking into the second half comp guidance?

So Michael, I mean, if we’ve seen some articles, lower levels of promotions, which fairly could to be tied to leaner inventories I think that’s what you’re getting at that’s what some of the articles that talk to. If the retailers in general promote less, there’s for us that widens the gap. So what’s interesting is as we look at that as still market share opportunity. And probably a little bit of margin opportunity and that there’s still availability out there. It doesn’t mean we will raise retails on like-for-like items because we say it’s an opportunity so we’ve been better at value and passing on to the consumer. So I guess, bottom line, we don’t get that caught up in that as to what happens with those type of forecast or in reality. Over a longer-term, I guess, you would see us adjust some things if it happened over a six-month, nine-month period, but probably does not shift us much in the shorter-term.

If I could follow-up, you gave a lot of good detail, obviously you are very confident in your traffic that you’ve seen fairly consistently and on the store count opportunity so we can kind of built some thinking around how you guys are looking at your topline. But for a while, the earnings algorithm seem to pretty steady low double-digit algorithm has been some costs that have come up, but we’re now almost two years into the wages and the FX volatility. As you look ahead since you gave us some preliminary comments on next year, does this ramp urgency to you to try and find others and the supply chain drive out cost to try and pull their earnings algorithm back up to low doubles? Or do you think we’re in extended period where you say, look we want to continue gaining the share even if that means mid single-digit algorithm for a couple of years?

Yes, I think you just summed it up well. Our focus would be – we think long-term, what we’re very, very happy about is long-term continuing to gain market share and do everything we talked about the store execution and the merchandise mix, driving that is our best form of marketing and long-term customer retention. And that’s for our long-term growth. So I guess, yes, we haven’t commented what the long-term model is, but we really are driven to beat the topline, that’s been our focus and drive traffic because we think long-term, over the next three to five years, that’s the best thing we can do, especially in this environment where consumers are fairly open to where they shop. So it’s a good time to keep acquiring new customers and increase frequency of our existing customers.

Okay. Thanks guys.

Our next question comes from Jeff Stein. You may ask your question.

Hey, guys. Can you talk a little bit about what’s going out in Canada? You’ve seen outside comps now for quite a few quarters and wondering what the dynamic is that’s driving topline there. Thank you.

I think with Canada, again, we had a nine comp versus our 14 comp, so we’ve – obviously, the foreign exchange has kept us some of the Canadians who would tend to shop cross-border in Canada shopping there. We would attribute some of that, but certainly, it’s not the most significant we think of why we’re getting nine in 10 comps. So there have been store closings. So I think we’ve – and I’ll let Ernie talk about the mix, the merchandise I think that’s what’s really driving it. But there’s a bit of the cross-border shopping or people just helping out, our people staying and not traveling as much.

Yes. Jeff, the other thing – as you can imagine, when you have comps like we’ve been having up here, there’s not one answer because the comps are so significant. So a few things we believe playing into it. One is like as Scott said you have the cross-border purchasing retention whether not leaving the country as much and that can apply to also not spending out online right, so they could’ve spent more online before U.S. dollars so that stays there. But one of the important things that has happened is we talk a lot about our talent and how we’ve had such a push throughout our Company on building talent and merchant talent and our buying organization even in the script today we talked about competitive advantage. We have a team up there who now is really executing, I think, at a high level, and a lot of that is because about three years ago, we started putting a full-court press on developing that team and stretching them and putting in the type of training programs and seniority and tenure that we really wanted that we - at the time did not actually have up there as much as we have in some of our other businesses. So when you have a strong merchant team, which we do up there, merchandising and planning, and its more seasoned now, you start to reap some of the benefits, and I think that’s what we were also reaping last year as well as this year. Probably one of the biggest reasons I think is that merchant team up there.

Great. Thank you very much.

Thanks Jeff.

Our next question comes from Marni Shapiro. You may ask your question.

Hey, guys, congratulations.

Thank you, Marni.

Ernie, I’m thinking your buyers are having a very relaxing summer.

I am not sure.

So I’m curious, you’ve talked a lot about the trends here in the United States about strong traffic, adjusting the AURs down a little bit, the abundance of goods. Can you talk to those three trends even specifically globally? Is traffic up globally? Have you changed the AURs globally? Is there an abundance of inventory globally?

So let me just, without giving you too much detail, say yes, the availability is global, and it has been global – it’s not just recent I would say it’s been that way for a year or two now. And so some, by the way, some of what we have been buying in Marmaxx and in HomeGoods is abundance of merchandise located internationally that we brought over here as well as our Europe division has clearly taken advantage of goods in Europe and in other places. I mean, there are goods everywhere, Far East. There’s no more than – it’s not just a domestic trend, I guess, which is I think what you’re asking Marni, right?

Yes, exactly.

And then the traffic increase has been across all divisions for several quarters now.

Yes, so that implies overseas as well.

Yes.

And then the ticket price, have you adjusted that globally as well or is that something you’re just doing at Marmaxx?

It’s primarily Marmaxx, but again, when you ask that question, adjusted, we bottom-up the ticket, so each division, it would tell you [worked out] to be Marmaxx to the largest degree, but it will – when we say it’s Marmaxx, it could change in a few months where we have the other divisions come down in ticket based on the dynamics where merchandise managers and buyers see an unknown area where they have an opportunity in a category or in buying something better. Again, we’ve had half of this fee from the mix not just from a buying the same item better. So that has spanned out, and it’s bottom-up though. So it’s not something we drive from here, so not only is it driven as divisions it’s driven down at the like middle management buyer level in a division.

That’s great. If I just one last follow-up on that. Are you also seeing I know the HomeGoods has been very strong and home in general has been strong here. You had a nice lift from it sounds like women’s. Are you seeing those kinds of trends is home strong globally? And are you seeing category trend similar globally that you’re seeing in the U.S.?

So our home trend obviously, as we’ve reported, is very healthy. And as we talk – as we talked many times, our merchants share best practices and share a lot of ideas and information as well as category performance. So those guys, like any of our teams, do share that information globally.

Excellent. Best of luck for the fall season.

Okay. Thank you, Marni.

Our next question comes from Oliver Chen. You may ask your question.

Thanks a lot. Ernie, regarding your earlier comments, what would you isolate as in the gift-giving department that the biggest year-over-year changes in terms of what you might be doing differently this year versus last year? And also, as you guys think about your in-store execution and customer satisfaction levels as well as strength, what are the big opportunities that you see with in-store execution that we should think about over the near and longer-term? Thank you.

Well, Oliver, let me say two good questions, both of which we really can’t give you the information on. Gift-giving is like we often say, we are poised strategically, and this is something we’ve looked at in all of the four major divisions. We’re poised to do a better job from – I can’t give you any specifics, but what I could say is from a how about this, from a merchandise mix perspective, on a marketing front as well as store execution. Because we have worked at all three of those factors and try to become more of a gift-giving destination. So years ago, as you would probably guess, T.J. Maxx maybe was not the coolest gift from. We are now today very cool place to buy a holiday gift from. And our marketing programs have really helped with that. The merchandise mix. The other thing we’ve done is because our supply chain is a better executed supply chain, we can turn goods around faster. So for holiday we have a lot of last-minute buys that now we can sprinkle in and get in pre-Christmas that we weren’t able to do before. So that’s something we talked about to you, but I think sometimes we forget to mention it again. So in addition to the strategic gift-giving marketing and store setup that we do and merchandise mix that this year we have some more, I would say fashion oriented categories that I think are going to be great impulse buys I think for the consumers. We’re going to also have the quick turnaround from the market closer in unpredictable buys. I think it will create just a more exciting fourth quarter business. And what I just said to you it applies to all four divisions. And so I think I touched when I was saying that. I think I touched a little on the in-store execution, but we look at that is clearly and that’s why it was in my script. We look at that the – first of all, we talk a lot about the merchants. Our store operators are fantastic, and we have some extremely talented associates in our store operating divisions across all of our companies. And that has become a place, and I think it helped with the cool factor and people shopping us is the way we execute our stores, and it’s brought in younger customers and more excitement. Yes, merchandise is certainly a high priority, but that has been right there within in terms if I think driving topline and increasing market share.

Okay. And Scott, merch margins were impressive. Was the main driver here lower markdowns and faster inventory turns? Was there anything we should know about how you’ve been able to do that so well?

The merchandise margins were extremely strong as we indicated at both Marmaxx and HomeGoods. And it was a combination obviously due to the above-plan sales, but it was combination of both mark-on and markdowns in both the combination of HomeGoods and Marmaxx. Offset those, still had some FX impact on currency in both Canada and Europe, more weighted toward Canada in the quarter. But no extremely strong margins, both in HomeGoods and Marmaxx.

Perfect. Thanks for the details and on next year too. Thanks for those details. Best regards.

Thank you.

Our next question comes from Lindsay Drucker Mann. You may ask your question.

Thanks. Good morning, everyone. I wanted to ask Ernie about a comment you made in your – I guess, as part of your script or Q&A just about the availability of goods right now relative to what you normally see just a whole lot of opportunity in the market. And I was hoping maybe you could put a little more context around that and also discuss if there’s any – what you attribute that to and whether it’s in a specific category or classification? Thanks.

So Lindsay, also a good question. We really don’t like to comment on specific areas of where the availability is high or low, categories, et cetera. What I would tell you is it’s across all – most families of business and it is most price ranges. And it’s not really a – it’s not like [indiscernible] one area or another it seems to be fairly widespread. And then also, I’d like to keep in mind, there’s never not goods right, so when I say it’s up a level from where it’s been, it’s not that there weren’t goods before clearly because there’s always goods and that’s why we’re always holding the merchants back. So I don’t know if that answers your question.

What do you attribute the change to?

I’d tell you one thing that has happened. So let me give you the internal versus the – so the external, we all know, the retail environment is holding up, but there’s always new vendors opening. So the thing you have to keep in mind that I think it’s easy to forget is we actually are up to about 18,000 vendors now that we deal with. So when we continue to expand our vendor portfolio and as you do that, you’re going to find more goods. So that is one of the things we would attributed to is our desire to always open new vendors, which that’s a little contrary to other models of retail. And the other models of retail, by the way are doing the right thing for their model of retail. Our model function is on a treasure hunt approach and a very shallow, a sorted, eclectic mix. And with that comes a desire to open thousands of vendors. And when you do that, there’s tends to be even more availability of goods.

Okay. Great. Thanks.

You are welcome.

Our next question comes from Richard Jaffe. You may ask your question.

Thanks very much guys and very impressive quarter. Ernie, could you spend a little time on marketing, particularly the loyalty program and how you see that working will it be across all brands or by division across all markets or just domestically? And how you expected to reach the consumer, will it be an outreach through e-mail, through texting, points, gift certificates. Could you give us some more details that would be very helpful? Thank you.

Yes. Let me give you what I can, Richard. So the loyalty program domestically, I think you’re aware we run – and I think when you ask about the loyalty program, you’re also asking about the credit card, which...

That’s part of it, right.

Yes. That credit card part of it has been very successful. We talked many times, I think Scott has actually given you some information on that a few times in the past. We also run what’s called an access program, which is a – I guess, you call it not a hard reward. It’s a soft reward loyalty program. It’s not tied in with the credit card, but they get access to certain events. And there’s a constant flow of information to – it hooks you up more within the T.J. Maxx or HomeGoods or Marshalls customer. Both have been growing and we are very, very happy with the growing of our credit card program, which we are adding significantly more active members. We can’t give you the number, but significantly more every year. And obviously, we get additional spending from those consumers. When you go to Canada, they do not have a credit card loyalty program, but they do have a non-credit card loyalty program, which is also doing very, very well. And in the UK, we are testing a loyalty program as we speak. So that’s kind of very early in the process. And when you ask what is our – our vision is to continue to do this in the model of our business because we don’t want to do anything that gets how would I put it? Gimmicky or promotional out of the loyalty program, which some retailers use it every now and then, do coupons, et cetera. So that is not we will take. But the way we do it, we feel like has brought tremendous communication between us and the consumer and loyalty and additional spending from those customers. Scott, you want to add anything?

Yes. Again, I think we’re talking we have millions of customers in our credit base program and we don’t give the facts, but close to adding a seven-figure number almost every year. These are most loyal, as Ernie said, most loyal customers how they cross-shop more than our other customers. I think Ernie said it right. We will add – we would love to add things to our other countries, but we have to do it within the confines of our business model and our partners what’s available for both – works from both us and them. One of the things I think we just mentioned earlier when Ernie was talking about stores and our sales is that our customer satisfactions scores have been going up in all of our divisions. I think some of it obviously absence to do with – pleased with what they found with a shopping – their overall shopping experience in finding the goods. But part of that has to do with the store presentation folks and doing a better job in our store standards, the friendliness of our store associates, hiring better folks, training better. And I think that certainly highly correlated to our – or having positive sales. And I think, again, our customer satisfaction scores have been going up at all of our divisions. One other thing failed to note going and talking about loyalty, in Canada, we have a non-credit based loyalty program that is extremely.

Very successful.

Very successful in terms of the penetration more or so there than in the U.S. the total penetration and again I think they’re just highly engaged and obviously, as we’ve talked about, we’re very well known in Canada, so I think that is a piece of our business and why we’re doing as well better there in terms of our comp sales.

Thank you.

Thank you, Richard.

Our next question comes from Matthew Boss. You may ask your question.

Thanks. So on gross margin, what’s the type of comp, what level of comp do you need to leverage buying and occupancy? What’s the best way to think about merchandise margins in the back half of the year? And then just largely, I guess, the question is excluding foreign exchange and wages, I mean, has anything changed with your 10% to 13% bottom line model here?

I’ll start addressing a few of those points. Again, we haven’t been giving out the 10% to 13% because both last year and this year, there are three things we’ve been talking about still exist, and that’s why we did portend some of them. We’re not going to say they are going to be at the same level, but the three major pieces being – wage being the biggest one, which is similar, we’re not saying it’s not going to go down in future years which if nothing happens it might moderate going past next year. But at the moment, we just called it out because it’s approximately at the same rate at this year. The second is being foreign exchange, that’s why we called it out, again at the moment it would not be at the impact of – this year’s impact of 3%. But it’s still would be low single-digits so we just wanted to call that out. So again, hopefully that will moderate and at some point will be a tailwind. Right now, it’s a headwind. The third piece is the investment to support our growth, again primarily the distribution centers, and which has been a bit lumpy as I think we try to explained before because we did not planned the high level of comps we’ve experienced in some of our businesses forcing us to move forward, make sure we can continue to gain all the market share we’ve gained. So it will – those will still impact us going forward, but we think we’ll moderate those systems and our distribution spend as we move forward in future years, but still going to impact us at least going forward for next year at a similar rate. And so those are three big components, so I don’t think anything has changed. Hopefully, they’ll start to moderate going forward.

Great. And then just the comp to leverage the buying and occupancy?

It’s in and around 3%.

Okay. Great. Best of luck.

Thank you. End of Q&A

Sir, we show no question in queue.

Okay. I would like to thank you all for joining us today, and we look forward to updating you on our third quarter earnings call in November. Thank you, everybody.

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