The TJX Companies, Inc. (TJX) Q2 2027 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to The TJX Company's Second Quarter Fiscal 27 Financial Results Conference Call. At this time, participants are in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, you will need to press 1. As a reminder, this conference call is being recorded 08/19/2026. I would like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer and President of The TJX Companies. Please go ahead, sir.

Thanks, Courtney. Before we begin, Debra has some opening comments.

Thank you, Ernie, and good morning. Today's call is being recorded and includes forward-looking statements about our results and plans. These statements are subject to risks and uncertainties that could cause the actual results to vary materially from these statements, including, among others, the factors identified in our filings with the SEC. Please review our press release for a cautionary statement regarding forward-looking statements as well as the full safe harbor statements included in the section of our website, tjx.com. We have also detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and in the Investors section of tjx.com along with reconciliations to non GAAP measures we discuss. Thank you. And now I will turn it back over to Ernie.

Good morning. Joining me and Debra on the call on the call is John. I want to begin by thanking our talented associates for their continued dedication to TJX and their commitment to delivering great value and an exciting treasure hunt shopping experience to our shoppers every day. Now to our second quarter results. Overall comparable sales increased 4%, which was above our plan. Our second quarter comp performance highlights the benefit of our global diversified business. While sales at our Marmaxx division were below our expectations, our 3 other divisions delivered comp sales increases of 6% to 7% which drove results that exceeded the high end of our plan. At Marmaxx, we believe we could have executed our store mix better. And by that, I mean, we could have been sharper having the right goods in the right stores at the right time. We are convinced that the issues were self inflicted and within our control. And we have made good progress working through them. We are seeing improvement at Marmaxx to start the third quarter and are confident that we will see greater improvement by the holiday selling season. As to second quarter profitability, I am very pleased that once again profits were well above our plan. Given this, we are raising our full year outlook for pretax profit margin and earnings per share. John will give some more detail about our second quarter results and guidance in a moment. As we look to the second half of the year, we are laser focused on driving the opportunities that we see for the business. The third quarter is off to a strong start. And availability of merchandise continues to be outstanding. We believe we have the right initiatives in place to drive sales and customer traffic to all of our retail banners. And I am confident we will execute on our plans. Longer term, we continue to see a long runway for growth ahead for TJX. We are excited about the continued potential we see to keep growing sales to keep expanding our global footprint and to keep capturing additional market share around the world for many years to come. Now I will turn the call over to John to cover our second quarter results in more detail.

Thanks, Ernie. I also want to add my gratitude to all of our global associates for their continued hard work and commitment to TJX. As I recap our second quarter results, I am going to speak to everything on an adjusted basis, which excludes the impact from the tariff refunds received as of the end of the second quarter and the related incremental compensation expense accruals. Reconciliations detailing the net impact of these items on our results can be found in today's press release and on the Investors section of our website. Now to show some additional details on the second quarter versus last year. As Ernie mentioned, our second quarter consolidated comp sales increased 4%, which was above our plan. Our second quarter comp was driven by a higher average basket and an increase in customer transactions. Further, our home categories out outperformed our apparel categories. Adjusted pretax profit margin was 11.9%, up 50 basis points versus last year and well above our plan. Adjusted gross margin was 31.4%, up 70 basis points versus last year and driven by an increase in merchandise margin, mostly due to tariff favorability. Adjusted SG&A was 19.7%, unfavorable by 20 basis points versus last year and driven by incremental store wage and payroll costs. Net interest income was neutral to pretax profit margin versus last year. Adjusted diluted earnings per share were $1.22, up 11% versus last year and well above our plan. Second quarter adjusted pretax profit margin and adjusted diluted earnings per share significantly exceeded our plan, primarily due to operational expense efficiencies, a higher merchandise margin and expense leverage on better sales, partially offset by contributions to TJX's charitable foundations. Now to our second quarter divisional performance. At Marmaxx, comp sales increased 1% and were entirely driven by a higher average basket, partially offset by a small decrease in customer transactions. While sales were lower than we would have liked, comp sales increased across all region and income demographic bands. Adjusted segment profit was 14.2%, flat versus last year. We delivered another good quarter of sales performance at our Sierra stores, and we continue to grow this chain across The U.S at our U. S. E commerce sites, we continued to add new brands to deliver even more freshness for our online shoppers. We are excited about the initiatives we have planned for our TJ Maxx, Marshalls, and Sierra banners this fall in the holiday season. Long term, we are confident in the market share opportunities we see for our largest division. HomeGoods delivered an outstanding 7% comp sales increase primarily driven by higher average basket and customer transactions were also up. We are very pleased to see strength at both our HomeGoods and HomeSense banners across all regions and income demographic bands. Adjusted segment profit margin was 12.4%, up 240 basis points. Our HomeGoods and HomeSense banners offer customers a highly differentiated mix of home fashions from around the world at compelling values. We are the largest off price home fashion retailer in the U.S. and believe that we are set up very well to continue to capture an even larger share of the market going forward. At TJX Canada, comp sales were excellent, increasing by 6%. The comp was primarily driven by an increase in customer transactions. Adjusted segment profit margin on a constant currency basis was 16.3%, up 30 basis points. We are the leading off price retailer in Canada and are very pleased with our strong brand awareness and loyal shopper base. We continue to see an opportunity to further grow across Canada with our 3 retail banners. At TJX International, comp sales increased an outstanding 7%. This comp was also primarily driven by an increase in customer transactions. We were extremely pleased with the strong consistent sales performance in Europe and excellent sales in Australia. Adjusted segment profit margin on a constant currency basis was 7.3%, up 210 basis points. During the quarter, we opened our 2nd TK Maxx store in Spain and again customer response was extremely positive. We are excited about our growth plans for our international division and have great confidence that we can attract even more shoppers in Europe and Australia over the long term. Moving to inventory. Second quarter balance sheet inventory was up 7% and inventory on a per store basis was up 2%. We feel great about our inventory levels and our convinced that we are well positioned to take advantage of the plentiful buying opportunities in the marketplace. As to our capital allocation, we continue to reinvest in the growth of our business while returning $1.3 billion to shareholders through our buyback and dividend programs in the second quarter. Now I will turn it back to Ernie.

Thanks, John. I would like to start by highlighting the opportunities we see that give us confidence that we can drive sales and traffic in the second half of the year. First, we are confident that consumers will continue to look for value in the current environment. We believe we have a large and deeply passionate customer base strong brand perceptions and an offering that resonates across many age and income brackets. We are convinced that we remain a very attractive option for shoppers who want great brands and fashions at excellent value. And believe they will seek out our retail banners this fall and holiday season. Second, we are excited about the product category initiatives that we have planned. We have become a year round gifting destination, and feel particularly good about our initiatives in this area. This strategy has worked well for us, and we believe it helps us stay top of mind for consumers. All of this gives us confidence that our exciting ever changing merchandising mix can inspire our shoppers and encourage more frequent visits. to our stores. Third, product availability continues to be off the charts across all categories and from a wide range of brands. Further, there continues to be more availability in the marketplace than we could ever buy. I am convinced that our team of more than 1.4 thousand buyers will bring shoppers the right assortments at the right values. Lastly, we are excited about the marketing we have planned for fall and holiday season. We will continue to follow consumer viewing habits, by employing a variety of channels with a strong emphasis on digital and social media. Our campaigns will continue to reinforce our value leadership with insightful and entertaining creative content that connects with shoppers across a wide range of age and income shopper demographics. We believe that our thoughtful, integrated marketing approach will help us attract new customers and keep us top of mind with our existing shoppers. Beyond this year, I am confident that TJX has significant opportunities to capture additional market share over the long term. I will briefly cover the key characteristics of our business that give us confidence. First is our reputation as a trusted value leader in The United States, Canada, Europe and Australia. We believe this is a tremendous advantage and our top priority remains offering great value every day to our customers. Second, we are a global sourcing machine We work with the universe of approximately 21 thousand vendors every year. To curate an unmatched mix of good better, best merchandise for our customers. Third, we are convinced that we have some of the strongest vendor relationships in retail. We have decades long relationships with many of our vendors, both domestically and internationally. Further, we believe vendors love to work with us as we are in the market buying consistently throughout the year, we can introduce their brand to new consumers and we offer them a very attractive way to grow their business. Next, we attract shoppers across a wide range of income and age demographics. In the United States, Canada, Europe and Australia. With our proprietary planning and allocation systems and expertise, we can create a differentiated treasure hunt shopping experience that appeals to a broad range of shoppers across each of our markets. Yet, many aspects of our business are driven by flexibility which we see as a key advantage. This includes our buying, our store formats and our supply chain and systems. Next, we continue to see tremendous opportunity to significantly grow our store base around the world. Today, we are increasing our long term store growth potential by 500 stores to a total of 7.5 thousand stores, or over 2.2 thousand more stores. With just our existing retail banners within our current 10 countries. This now reflects the long term potential for our TJ Maxx and Marshalls banners to expand an additional 300 stores to a combined 3.3 thousand stores And for the home goods division, expand an additional 200 stores to 2,000 stores. Further, we are planning to accelerate our store openings to 4% starting next year to take advantage of the growth opportunities we see out there. I want to assure you that we are extremely confident that there will be plenty of quality merchandise available to us to support our growth plans. Last and most importantly, is our exceptional talent around the world. I truly believe that the depth of our off price knowledge and expertise and the longevity of our talent within TJX is unmatched. Talent development has always been a priority, and we remain laser focused on teaching and training the next generation of TJX leaders. Also, I am very proud of our culture and believe that it will be a tremendous advantage as we continue our growth around the world. I am convinced that the combination of all these core strengths of our business set us apart from many other major retailers. Further, I believe these have allowed us to successfully navigate many different kinds of retail and macro environments over our nearly 50 years as a company. And I am confident they will continue to benefit us. Summing up, we are pleased with the overall performance of TJX in the second quarter. Again, our above plan results demonstrate the power and benefits of our global diversified business. I want to reiterate that at Marmaxx, we have seen a sales improvement to start the third quarter and are confident we will see greater improvement by the holiday selling season. The third quarter is off to a strong start and we believe we are strongly positioned in today's consumer environment. We are excited about the initiatives we have planned for the remainder of the year. Importantly, over the near and long term, we plan to continue to play offense in our approach to marketing, merchandising the in store shopping experience, global store growth and our investment in talent. I am convinced that TJX is set up extremely well to capitalize on the growth opportunities that we see around the world from many years to come. Now I will turn the call back to John to cover our guidance then we will open it up for questions.

Thanks again, Ernie. As I recap our guidance for the remainder of the year, I am going to speak to everything on an adjusted basis which excludes the benefit from tariff refunds that we received in the second quarter and expect to receive in the third quarter. Our adjusted guidance also excludes incremental compensation expense accruals related to the tariff refunds for the second, third and fourth quarter. Again, reconciliations can be found on the Investors section of our website. Starting with the third quarter, are planning overall comp sales to be up 2% to 3%, consolidated sales to be in the range of $15.6 billion to $15.8 billion up 3% to 5% versus last year Adjusted pretax profit margin to be in the range of 12.3% to 12.4%, down 30 to 40 basis points versus last year's 12.7%. Adjusted gross margin to be in the range of 32.1% to 32.2%, which would be down 40 to 50 basis points versus last year's 32.6%. This would be primarily driven by higher fuel costs. Adjusted SG&A to be 20%, 10 basis points favorable versus last year's 20.1%. Assuming net interest income of $28 million, which we expect will be neutral to our third quarter pretax profit margin versus last year. This assumes that we will pay off the $1 billion note maturing in September. Our third quarter guidance assumes a tax rate of 24.6%, and a weighted average share count of approximately 1.11 billion shares. As a result of these assumptions, we are expecting third quarter adjusted diluted earnings per share to be in the range of $1.30 to $1.32, up 2% to 3% versus last year's $1.28. Moving to the full year. We continue to expect overall comp sales growth of 3% to 4%. We expect full year consolidated sales to be in the range of $63.4 billion to $63.8 billion up 5% to 6% versus last year. We are increasing our full year adjusted pretax profit margin guidance to be in the range of 12% to 12.1%, up 30 to 40 basis points versus last year's adjusted 11.7%. We now expect full year adjusted gross margin to be in the range of 31.2% to 31.3%, up 20 to 30 basis points versus last year's adjusted 31%. We now expect full year adjusted SG&A to be 19.5%, flat versus last year's adjusted 19.5%. We are assuming net interest income of about a $131 million, which we expect to be neutral to our full year pretax profit margin versus last year. Our full year guidance also assumes a tax rate of 24.6% and weighted average share count of approximately 1.12 billion shares. As a result of these assumptions, we are increasing our full year adjusted diluted earnings per share to be in the range of $5.15 to $5.20, up 9% to 10% versus last year's adjusted $4.73. Lastly, our implied guidance for the fourth quarter assumes no further tax refunds and excludes the incremental expense accruals related to the third and fourth quarter tariff refunds. For the fourth quarter, we are expecting overall comp sales to be up 2% to 3% adjusted pretax profit margin to be in the range of 11.9% to 12%, down 20 to 30 basis points versus last year's adjusted 12.2%. And adjusted diluted earnings per share to be in the range of $1.44 to $1.47, up 1% to 3% versus last year's $1.43. In closing, want to reiterate that we are excited about the growth and market share opportunities we see in the near and long term. We are in an excellent position to continue to invest in the growth of TJX while simultaneously returning significant cash to our shareholders. Thank you, and now we are happy to take your question.

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

Great. Thanks. So 2 questions. Ernie, first, could you speak to the progression of same store sales at Marmaxx during the second quarter? Elaborate on the sales improvement that you cited in August at Marmaxx and drivers of the strong start to the third quarter. And then, John, could you talk to the recent new store performance metric that you have seen and just the opportunity you see today to raise your store target?

Sure. Okay, Matthew. I think, John, you want to I mean, I will start with the quarter and then I will take over. So across the board, we came out stronger in May. And then we saw consistent sales in June and July. Pretty much across the board.

And then, Matthew, on, I think you are referring to talking about the strong start to the quarter and what we are seeing there. Yes, across all of the businesses, And we mentioned the, you know, 1 of the strengths that you see here, and, obviously, there is a concern about the Marmaxx comp that we had as well. But I think what we exemplified here on this quarter is the ability to be consistent by having all of our other businesses outperform and significantly from Canada to Europe to HomeGoods, and then, you know, Marmaxx underperforming due to some execution issues. I would tell you all of them. I like the way we are trending with all of them starting off this, Q3 in August. Marmaxx, we are seeing improvement from where we were trending before. And then I am really looking for Marmaxx, as we move ahead, to see more significant improvement as we get to fourth quarter. But I think you are asking about the overall strong start across the board And then to answer your second question, so we look at this, obviously, very frequently, our store potential.

And we have been seeing for, you know, for a bit of time that we had some opportunity in Marmaxx and HomeGoods to continue to grow our store base. So we took the opportunity this quarter to increase Marmaxx by 300 stores HomeGoods by 200 stores. And, again, for Marmaxx, we are seeing opportunities in rural markets where we see department stores are closing. We are seeing the opportunity as the store, as we have experienced strong comp growth for so many quarters that we are seeing the ability to put stores closer together than we thought before. And then the small format store that allows us to expand in a lot of densely populated urban areas as well. And so we have been seeing the opportunities to increase our store growth potential and the annual growth from what we were saying before, a 3% unit growth to 4% growth based on the availability that we are seeing pretty much across the board. And so when we look at where we see the opportunities, we see it across every single brand that we have. Yeah.

So we are, to John's point, Matthew, we are seeing that additional 1% store growth across the board also. that is not just a 1 division or 2 division driving that. Yeah. The other thing I think the teams have done a good job is getting more flexible in our approach to these smaller formats. Looking at what John's talking about is our teams, whether it is planning and allocation that ships the goods to the stores, and our real estate division, which designs and constructs the stores, finds the locations, We are getting more flexible based on population density, etcetera, in some of these locations, as John mentioned. Which I think is also opening up opportunity. Right.

And then just to, you know, I know you asked this, and I did not answer it. The performance of our new stores, for a long time. We have been exceeding our expectations on our new store openings for quite a while. And so we see no concern there either.

it is great color. Best of luck.

Thank you. Our next question comes from Lorraine Hutchinson. Your line is open.

Thank you. Good morning. Just wanted to get a little more insight on things. I was hoping to get a little more insight on what went wrong at Marmaxx. The steps you have taken to fix it. Yep. And then how quickly do you think you will be back to a more normal 2% to 3% comp cadence at Marmaxx specifically?

Yeah. Great question, Lorraine. Obviously, this is 1 that we thought would be important to discuss on the call, which is why we had it in the script as well. where, well, without giving specifics to the families of business, which you know, we can never do that, if you go back, you have covered us for a while, you know, even a number of years ago. We had execution issues. We did not give the areas specifically because of competitive reasons. However, what we can say is we have identified it was pretty obvious to which areas they are in, where we did not have I would say, the right mix, merchandise mix. In TJ Maxx and in Marshalls. And it was really entirely self-inflicted and within our control. To the point that I have been involved and all teams have been involved in those areas, which involves the merchants, buyers, merchandise managers, GMMs, senior merchants. Our planning and allocation teams were involved. In identifying the execution issues, I mean, all the way from, all the way from, you know, the buyers and planning all the way up to me. Everyone's involved. We have identified them. And I think we are well on our way to fixing the issues. I think, you know, from our past that when we focus on a missed execution issue, we are able to fix it pretty readily. I would say when and you started to hint that in your question, what type of timing gets us back to the 2% to 3%. I would say we are seeing a trend improvement already in August versus in Q2. I am most confident that we will be seeing what you are talking about by Q4. And I think a transition toward that over the next couple of. I hate to lock myself in on an exact number right now. But, we are feeling really good about it. Again, everyone is involved. We know exactly where we fell down. I would tell you it had nothing to do with if there is any question on did this have to do with any competition out there of any sorts? It had nothing to do with that. We have measured, we have actually gone out and measured where our stores are versus direct off price competitors, and our comps are actually at pretty much identical to wherever direct off price competitors are near us versus away from us. Our stores are comping identically. So which, by the way, the good and the bad of that is it tells us it is our own execution. So I guess, you know, in the past, we, I always talk to the teams it is really, always up to us generally when we have had a tough business. So I go back to on a much larger scale, John and I talk about this always, when you go back to Europe, a number of years ago, as you know, we were we did not have strong execution there. In fact, we put in a objective of sales and getting to a more profitable bottom line that took it took a little longer than this will take by far. But that was something we identified execution issues there, and we fixed it on a large scale total business situation. So, hopefully, that answers your question, but, you know, obviously, a very pertinent question. Thanks, Ernie.

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

Yeah. So just to clarify, I believe you are you are specifically asking about Marmaxx. Marmaxx started the quarter. Slightly stronger in May June and July were consistent. All 3 months were positive. Comps. Yep.

The, decline in transactions from what we can see, had nothing to do with conversion. And more to do in cases of where we did not have-- we had it was not a like item where retails went up and the value was not good, We have comp shopped aggressively. Our values are really the best around. Nobody is underselling us. And what it is, without giving specifics, it is more about what we did not have in the mix. And so, what that does is it you do not necessarily capture that sale. And it was not really an execution on what we had in the mix. So that would apply to, really, all of those handful of areas that I spoke about earlier. And so that is when you are just not you are not selling the customer when she's in. I guess you could say, if we had it would we have converted on the visit a little higher? Hard to measure that. But we know, again, what the problem was there. Yeah.

So are you just not having that it is more of a traffic issue that customers knew that the product was not there? Right?

No. Because, again, our traffic's driven off of every day. A lot of our traffic is word-of-mouth is just constant traffic. Right? We have a regular frequency of traffic. We do not do instant institutional price and item advertising. So and people know that we are a treasure hunt operate. Right? We are treasure hunt. So they know we are gonna sometimes have things or not have things. The issue is if we do not have some of these things that are kind of impulse driven, they are in the store, and maybe they would have picked it up anyway. They do not necessarily know we are gonna that is why we lost some. Then we did lose some on categories that were more basic. I cannot, again, I cannot give you what they are. For competitive reasons. Where we did not have the appropriate mix. I do not think the customer knew we did not have it but they probably came in and were not able to buy it. So Yeah.

I mean, our transactions we quote our transactions through the register. Right. it is not footfall. We do not have we do not have people counters. Yeah. Yeah.

Alright. Got it. Okay.

Thank you, You are on, Paul, definitely the right I would be asking the same question. Thank you. Good luck.

Thank you. Our next question comes from Brooke Roach Your line is open.

Good morning, and thank you for taking our question. Ernie, a moment ago, you spoke to execution issues as more of a factor of what you did not have in the mix than what you did Your buyers typically have a very strong knowledge in knowing exactly what the customer wants and what categories and items are trending. What do you think led to this miss step on their knowledge of the pulse of the customer And what changes are you implementing in buying and allocation to be a little bit more consistent as you move into that important holiday season?

Yeah. So we have again, I cannot give you the, exact thing. We have instituted 2 more systematic changes. In planning. I cannot tell you what they are. But planning has a is putting in something that will help monitor the situation so that it does not happen to that degree. We are all again, remember, we are a bit of an art form secret sauce situation where things so rigid. Merchants are making their best calls at the time. And, you know, sometimes I like everyone to realize, you know, Marmaxx has quarter after quarter of really strong business And the last time maybe that we had something like this might have been about 8 years ago. So I wanna be careful on overreacting to what was a definitely a lack of execution in a handful of areas. Because, you know, this is something that can happen in a business that is a bit of an art form. And you look for certainly, closeouts in certain areas, and we plan a little bit ahead. And sometimes we do not put in place the right plans and the right combination of executing to those plans. So there is a lot of moving parts. You know, it is it is it is rare, but it can happen. So we put some basically systematic processes in place. Some of it in really is involved from the planning side, ironically, which is supposed to help the buyers. On this. And I think that is really gonna help mitigate this going forward. As well as, by the way, as I think I mentioned earlier, we had everyone involved on these discussions about these areas from buyers to MMs, to GMMs, to the president of Marmaxx, the head merchants in Marmaxx, myself, the senior ex executive vice president also mean, like, everyone has been involved. The heads of planning, etcetera. To get it institutionalized. So good question, Brooke. But I think I think we have it all kinda circled. Great. Thanks, Ernie. we.

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

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

that is very good. Question, Alex, across the entire HomeGoods business. I like it. First of all, that team has been executing, as you as you said there when you asked the question, consistent for a while now and somewhat bucking the trend in the industry. Right? I think they, have been succeeding more, really over the last number of years at creating a level of excitement and impulse treasure hunt shopping across anything from, you know, domestic categories, which are really second to none in value. That we deliver anywhere from you could go to, you know, our kitchen department with gadgets to kitchen linens to, towels, sheets, giftware, gourmet food from Europe to, seasonal decor, wall decor, everything is hitting on all cylinders. They, and we have talked about this before. They are consumable business, items that get replenished You probably can guess what those categories are. This team has put in place something that I think is continuing to drive additional steady traffic because people are now aware not only all the impulse that, you know, everyone for years has written about in HomeGoods, they are getting day in, day out consumable staple product that they need to replenish on a regular basis. That is, that these teams have done an amazing job at that. I think the store execution also in terms of easing the ease of shopping, our store team's there. Have done an amazing job on the presentation. Within HomeGoods. it is such an easy store to shop. In what in some cases, is difficult categories to shop. And I think our store execution there is different. And I think our home merchants across the corporation I know you are asking about HomeGoods. Our home business across the corporation which is, again, is over a third of our business, over 35%, give or take now. Is healthy across the board. And I think that is because HomeGoods and a lot of the home merchants collaborate in a strong way. And what that has created is an even stronger diversity of mix throughout our home business and home goods and across the rest of the divisions in TJX. So I think, yeah, I think we have, way more opportunity as we move ahead By the way, admittedly helped by, I think, the execution of competition in home, around the board. In every country and specifically in The United States, competition there is just not, I would say, up to par and does not give you the fashion utilitarian approach of goods that we deliver in home goods. So we are we are as you can imagine and you mentioned the margin. I know John will probably talk to that briefly. But also part of the team, they are driving top line and margin expansion at a rate that is helping to move the needle, within TJX. And I know you are asking about HomeGoods. I just also have to mention, Canada has Carol and Europe are also sometimes they do not get in a lot of airtime, and I am only bringing it up because you are bringing up 1 of the other divisions. Those divisions, in Canada specifically is the size of getting close to the size of, HomeGoods. And those divisions, profit increases and sales increases Europe as well are continuing to just all those teams are executing at a very high level and taking market share in their geographies as is HomeGoods here domestically. John, I do not if you have Yeah.

Just to expand a little bit on what Ernie was talking about there. Far as HomeGoods. You know, the biggest driver that Ernie mentioned was, again, the top line growth. I mean, we you know, a 7 comp is certainly gonna expand margin. We also had nice operational that we saw in the division. Then, of course, the largest item, which is the merchandise margin improvement, mainly driven by lower tariff costs Perfect. Thanks so much. Good luck.

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

Hey, guys. Thanks for taking our questions. Let me ask with a quick 1 on the gross margin. I think with the strong start to the year before today, there is some potential for maybe upside to the gross margins that you guys are thinking about in the back half. Think you are more or less keeping the second half the same today for gross margin, maybe 10 basis points lower at the low end or something small like that. But can you maybe just walk us through the changes to the second half gross margin plan that net out to holding it flat? And maybe it is a boring question, but you added some freight and I would assume maybe there is some Marmaxx markdowns. It seems like maybe there potential for some new positives that we should be considering.

Yeah. So, Michael, if I if I am comparing the first half to the second half, you know, the biggest piece is gonna be the fuel and the fuel the freight rates that we are seeing. So in the first half, we had favorability on our freight accruals that we excuse me. The freight mark to market of our hedges that we had out there. And, again, we have to mark to market those at every quarter. So the back half, we are seeing higher fuel rates comparatively speaking. Freight rates also due to due to what we are what the trucking companies are seeing, they are seeing less driver availability, which is driving up price. And so that is that is due to either younger kids that are not going into truck driving or a combination of that. And you know, some of the things that we have seen as far as foreign drivers, you know, leaving the country. And some of the pressure that we have seen there. Certainly, first half having a 5 comp in the first half versus guiding to a 2% to 3% in the back half is a piece of it. And then merchandise margin, you know, favorability in the first half that we saw. So when look at the institution of the IEPA tariffs, last year, there were goods that were placed before the tariffs were put in place, so we did not have an opportunity to negotiate those tariffs. So we are anniversarying that. And that is the exact opposite happened this year where the we had goods that had negotiated a tariff out, and then the tariff was it was eliminated before the goods were landed. So those are the 3 main things that differentiate the first half from the second half. Does that does that And then maybe Does that answer your question?

Yeah. I guess what I think so. Is there was there any new positives versus where we were days ago as you think about the back half?

I know you are doing front half and back half. I mean our front half and back half is, again, is very similar to what we had guided to underlying, guided to at the second quarter, which is why the $0.05 beat, we flowed the $0.05 on the full year. So we are well, obviously, there is puts and takes, but for the most part, we are consistent.

Okay. And then if I could sneak 1 more in on profitability since you made me think about this here. I was pretty pleasantly surprised to see Marmaxx able to hold the segment margin at the 1 comp Is there if you just let us know for our models, is there any shift or any transitory benefits we should be mindful of in the second half?

No. No. Nothing there. You know, we again, we have called this out in our in our prepared remarks. We did experience lower tariff costs in the second quarter. So I would say that, you know, what we what we put out there as far as our guidance is what we believe in, and we are gonna work hard to beat that guidance during the quarter.

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

Thank you. Our next question comes from Jay Sole. Your line is open.

Great. Thank you. Ernie, I want to ask you about the 7.5 thousand long-term store target. Can you just tell us about Sierra? And also HomeSense? And maybe a little bit about Europe as well, how those fit into the plans. Then you I think you very specifically called out within your existing countries Why not sort of talk about maybe new potential countries that you know, the company might be going to over time? Thank you.

it is very good, Jay. Yeah. Well, first of all, let me talk to the last thing first, which is we typically well, I would say we are always looking at new countries, for potential as we did with, and it is not always the same structural deal. Right? But as you know, we went into Mexico, in our JV and then our investment in, Brands 4 Less. And Spain, which, John talked to, is doing really well. And I think, by the way, part of our new store upping is we are pretty bullish on new Spain openings down the road realizing that, the customer base is reacting even stronger than we anticipated there.

that is not part of our that is not part of our no. Not even part of our numbers. Potential opportunity in the future. Yep.

Yep. The other 1 the other ones you are asking about is Sierra is, you know, disproportionate that adds disproportionately into the growth, right? it is a higher growth rate Yes. Than the 4% by far. And so is HomeSense. So, those are both well above 4%. Growth because they are both doing well. And we are always looking at new market potential, so you know, because we have shown, as witnessed by Australia, also, any new market we have gone into, if we have, brought the TJX secret sauce and TJX tenured associates to lead it. We have done very well. So, you know, again, I cannot say enough about what we are showing internationally. I am glad you are asking about this. What we are showing is the ability, I think we are better than ever at showing that we can grow our model wherever there is a market in an So as much as I cannot tell you what the next country is, you can be assured that we are looking. Yeah. Okay. Thank you so much. Yep.

Thank you. Our next question comes from Marni Shapiro Hey, guys.

Hi, Marni. I am curious. Could we talk a little bit about some of the other categories at Marmaxx? I know you do not want to get into too many details. You talked about you know, missing things that were not there. Are those fashion things that were not there, or is it know, you mentioned impulse items. How is beauty doing? You know, things like that to me feel like more impulse And I think you talked about at HomeGoods across the board, things are doing well and things like staples that people need to replenish. And I remember being on the store and talking about how people were buying their dinner. At HomeGoods to make that night. Are consumables still doing well? Can you just talk a little bit about the kind of nonapparel categories and non-traditional home categories?

Non So, but, Marni, I cannot obviously, I cannot give you in Marmaxx the ones I cannot tell you, whether it was fashion. I it is a bit of a mix. And I cannot get too specific on which family or categories there we felt on only because of competitive environment we are in. And giving that information externally. I can tell you it was not any 1-dimensional. It was a combination of different things in Marmaxx. And then at the same time, as witnessed by the fact, in Marmaxx, that we ran a 1 and not a -3 is we had a lot of categories that were performing well. So, you know, we had a handful of areas that when they get hit, it pulls you down from what could be a 2 or 3 down to a 1 is what happens because in Marmaxx, as you know, in this and clearly, the street thinks this. The differences between a 1 and a 3 is just a very that is kind of what we are talking about here, not a, you know, a -3 to a +4 or So it can be a pretty-- you can have, excuse me, a handful, and it throws you off where you are just missing the 2 comp by a little bit. And then HomeGoods, the, reply yeah. Across the board, I probably should not just emphasize the, the replenishment, as you call them, categories. Because it is really, it is not just the consumables. it is across the board. A lot of the decorative and even some of the higher ticket areas are doing really, really well And I am talking, you know, from lighting to wall, categories to, without giving anything away. I think they are just executing almost every mix at a very high level. And I again, I think what the merchants are doing in HomeGoods and planning and the stores and executing distribution. They have all cylinders clicking marketing. Is they are giving the customer an experience they really it is difficult to find that experience in any other retailer. it is a different type of treasure hunt, and some of the goods, as you know, are very unique that only HomeGoods has. In a different type of manner. Whereas you go to a apparel across the board. You know, we apparel that we would would have in whether it is a TJ Maxx or Marshalls or Sierra, you know, that apparel fortunately is in other places where better value want it. I think in HomeGoods, you have some just unique product categories that creates a whole other reason to shop them. So that is the innovation that I think I do not think anybody else in the home industry, and I am not just talking The United States, I am talking Europe, Canada. As you know, in Canada, we over index. that is our largest 1 of our largest market share geographies in the corporation. And now that you have had closures with the bay, it etcetera, we just continue to, the Canadian merchants are doing an amazing job in HomeSense. And in, Winners and in Marshalls in Canada. And I think, we do not talk about Canada a lot, but they just continue to gain major market share there as well. Similar to what HomeGoods is doing here, Canada's doing there. K.

I have 1 follow-up on HomeGoods. Your back to college set was unbelievable. I mean, stop me in my tracks. Unbelievable. And I am just curious if you saw a pickup in traffic and in trends at HomeGoods when that set.

Yes. They have been, very pleased. I do not have the specifics in front of me, but I know the team has talked about their back to campus is what they call it. The set and the results have been, have been very healthy. Yep. And I think to your point, the timing was perfect. And it looked, I think, better than better than ever. I am glad you noticed it. It was Yeah. Stunning. Took my breath away. Congrats to that team. Thank you, Ernie. Yeah. No. Congrats. Thank you. And they will by the way, Marni, they will appreciate that comment. On that. Fab.

Thanks, guys. Thank you, Marni.

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

Hey, Ernie. I guess I was going to ask I guess my first question is, how are you doing? On the freight side, I think you meant mentioned this to Michael already, but has the freight expectation in the back half changed versus 3 months ago? Or is this kind of what you thought it would be then the follow-up to that is, not so much August and back to school, but for the fourth quarter, there is more and more red flags around Super El Nino weather impacts to the quarter. You guys have kinda done really well in those past couple times we have had these Super El Ninos going back to the model. Just curious if it is starting to affect the way that you are planning product, planning merchandise mix. Just kinda curious how you are starting to think about the holiday even though I know it is early. Thanks.

Yep. I will let So I will let John I will I will start with a great question. Yeah.

I mean, it is in line with what we were expecting. I mean, obviously, the at the beginning of the year, we the first quarter, when we mark to market fuel hedges, we knew that, that was taking a lot of benefit that so that when the actual we got to the later the next 3 quarters, it was gonna be a negative impact. So, it was it was all expected. Yeah and on Got it. It.

Icon, the on the weather thing, we so what we do is, you know, we try not to, get specific on the weather, but the liquidity and I think you said this before, we have tended to no pun intended, weather the storm on these things pretty well. Right? We because we keep our liquidity and our shipping out of our warehouses is something we control a little better than traditional retailers. Our goods do not have to necessarily go straight to the lanes and go to the stores if we think there is going to be an unusual weather pattern in a certain region, So where we this is a benefit of our model where we stage goods our warehouses versus goods that most brick and mortar retailers come into the warehouse and have to go out We have racks where we can manipulate in our planning organization is really good at reacting to any, wild swings in weather or natural disasters or any of those red flags. I think that is what you are talking about. So yeah, I think, for now, they are just they just stay aware. And as you get as we get closer in, we can maneuver. Again, we are set up to maneuver better than most brick and mortar.

Got it. Thanks, guys.

Thank you. The final question of the day comes from Aneesha Sherman. Your line is open.

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

Okay, Aneesha. Yeah. Well, on the first, on your first question there, which was AUR and ticket. Yeah. I yes. We have seen increases. I would tell you in this environment to what you said, I we are gonna moderate there. And I think it might you know, we might be up a few is the way it is been kind of tracking, but I do not see a long term trend there heading that way. it is probably gonna moderate a little bit, and that is our best guess. The only reason, then I would tell you I think we have talked about this before. it is bottom up. In our organization, so we do not dictate ticket from top down. And so, if certain exciting categories or vendor deals come down, and some of the better vendors that can throw us for a little surprise in a good way where we have some crazy deals from better vendors that can have our ticket go up short term. And then you have category mixes, and that is what I think we have talked about in the past is the mix of certain categories within the whole store is what sometimes has made our mix go up. it is not like for like items or categories where the retail has changed. it is the mix within the store has changed to more higher average retail categories. So I think our escalation ticket will probably moderate and that is just an educated guess over the next 6 months. And then your question on advertising spend. So we plan very consistently year over year. And then in the in the year, if we are having a strong year, oftentimes, we will we will commit a little more dollars to the to push that message, continue to feed the fire. Aneesha, though, so you have an idea about which this current is. In the first half of the year, we had 1.1 billion paid video views across Facebook, Instagram, TikTok, Pinterest, YouTube, which shows you that would not have looked that way on the last couple of years, shows you how aggressive by the way, we had over 300 million in HomeGoods. So 1.4 billion video views across, those venues of Facebook, Instagram, Pinterest and YouTube. And that is just in the first half. Our customers are. And the neat thing about it is, we see t the TJX brand c video completion rates on TikTok and YouTube that are significantly above the industry benchmarks which that is really demonstrating that our content is really highly engaging to the customer. So they are staying on watching the content through most of the video, which is not always the case with a lot of competition out there. They will show it as a view, but they do not necessarily watch the entire thing like our customers are watching. that is really good color.

Thank you. we. Thanks for the question.

And I think that was our last question. Thank you all for joining us today. We look forward to updating you again on our third quarter earnings call in November. Thank you, everybody.

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