TJX (TJX) Q4 2026 Earnings Call Transcript

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DATE

Wednesday, Feb. 25, 2026 at 11:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Ernie Herrman
• Chief Financial Officer — John Klinger

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TAKEAWAYS

• Consolidated Comparable Sales -- Increased 5%, with all divisions achieving comp growth of 4% or higher and balanced performance across income segments and geographies.
• Net Sales (Adjusted Basis) -- Fourth quarter net sales rose 9% to $17.7 billion; full-year net sales surpassed $60.4 billion, up 7%.
• Adjusted Diluted Earnings Per Share -- Fourth quarter EPS grew 16% to $1.43; full-year EPS increased 11% to $4.73.
• Adjusted Gross Margin -- Fourth quarter gross margin was 31.1%, up 60 basis points; full-year margin reached 31%, a 40 basis point increase, including a 20 basis point benefit from reduced shrink.
• Adjusted Pretax Profit Margin -- Fourth quarter pretax margin rose 60 basis points to 12.2%; full-year increased 20 basis points to 11.7%.
• Segment Performance -- Marmaxx annual sales totaled $36.6 billion with comp sales up 4% and adjusted segment profit margin at 14.4%; HomeGoods exceeded $10 billion in sales with 5% comp growth and 12% segment profit; TJX Canada delivered $5.6 billion sales with 7% comp and 13.8% margin (constant currency); TJX International reached $8 billion in sales with 4% comp growth and 7.3% margin (constant currency).
• Inventory Positioning -- Balance sheet inventory increased 14%, with per-store inventory up 10%; management expressed confidence in availability and merchandising flexibility.
• Operating Cash Flow and Liquidity -- Generated $6.9 billion operating cash flow, ended with $6.2 billion in cash, and returned $4.3 billion to shareholders through buybacks and dividends.
• Fiscal 2026 Guidance -- Management projects 2%-3% comp sales growth, 4%-5% reported sales growth ($62.7 billion–$63.3 billion), pretax profit margin of 11.7%-11.8%, gross margin of 31.1%-31.2%, and adjusted diluted EPS of $4.93–$5.20 (4%-6% growth).
• Store Expansion and Capital Plans -- Plans call for 146 net new stores (about 3% growth), including U.S. and international openings, over 540 remodels, and $2.2–$2.3 billion in capital expenditures.
• Shareholder Returns Outlook -- Board expects to raise the quarterly dividend by 13% to $0.48 per share and repurchase $2.5–$2.75 billion of stock in fiscal 2027.
• Tariff Impact and Merchandise Margin -- CFO John Klinger stated, "our full year guidance assumes that we will be able to offset the tariff pressure on our business this year," and management highlighted flexibility in sourcing and negotiation as margin drivers.

SUMMARY

Management highlighted a "very strong" holiday quarter, citing broad-based comparable sales and margin expansion across banners, consistent customer acquisition in all geographies, and robust inventory availability fueling near-term merchandising flexibility. Leadership confirmed foundational investments in stores, systems, and marketing—including aggressive campaigns and store remodels—aimed at capturing market share as macro and competitive disruptions present incremental opportunities. Shareholder capital return remains a priority, with a planned dividend increase and continued buybacks detailed alongside a global store footprint expansion, including entry into Spain.

• CFO John Klinger reported HomeGoods leveraged by 150 basis points in the quarter and 110 basis points for the year, driven by sales and margin gains, with operational improvements cited as key contributors.
• Management emphasized a deliberate approach to pricing, maintaining the "appropriate value gap" versus competitors while noting customer perception of value "has actually improved over the last six months."
• Leadership attributed merchandise margin improvement to "a truly glutted market of merchandise," flexibility in buying, and strong vendor relationships, enabling opportunistic sourcing and negotiation.
• Segment data reveal that TJX International's adjusted segment profit margin rose significantly to 7.3% on a constant currency basis, driven by execution in Europe and Australia and an announced market entry into Spain.
• CFO John Klinger indicated that shrink has returned to pre-COVID levels, having delivered 20 basis points of year over year gross margin benefit; future improvements are expected to be more incremental.
• Store expansion guidance for fiscal 2027 includes five inaugural Spanish stores and 24 new Sierra locations, reflecting intensified focus on portfolio diversity and global reach.
• Management acknowledged that comp increase was "a combination of a higher average basket and an increase in customer transactions," with average basket—the result of mix and retail—being the larger driver in the quarter.
• Management is monitoring changing tariffs, with near-term episodic vendor pricing responses expected, while emphasizing the company’s agility in maintaining value positioning independent of market fluctuations.
• Leadership stated that advertising and marketing are being used "as an offensive weapon, more than we ever have before," with new campaigns at HomeGoods, TJ Maxx, and Sierra supporting top-line acceleration initiatives.

INDUSTRY GLOSSARY

• Shrink: The loss of inventory from factors such as theft, error, or damage, impacting gross margin.
• IMU: Initial Markup; the difference between cost and initial retail price, critical for merchandise margin analysis.
• Marmaxx: TJX Companies’ largest segment, including the T.J. Maxx and Marshalls banners in the United States.

Full Conference Call Transcript

Ernie Herrman: Good morning. Joining me and Deb on the call is John. I want to start today by acknowledging our global associates for their excellent work in 2025. I truly appreciate their ongoing commitment to both The TJX Companies, Inc. and our customers every day. Now to an overview of our results beginning with the fourth quarter. I am extremely pleased with our excellent fourth quarter results. Fourth quarter sales, profitability, and earnings per share were all well above our expectations. Overall, comp sales were up a very strong 5% with comp sales strength at each of our divisions.

I am convinced that our exciting assortment of merchandise and great values resonated with shoppers across all of our retail banners this holiday season. Further, our teams did an excellent job transitioning our stores post-holiday to the categories and trends that appealed to consumers, and I am confident that our merchandise mix positions us well as we start the year. For the full year, overall net sales surpassed $60,000,000,000, marking a major milestone for our company. We are even more excited about the future and the global opportunities we see to keep growing our customer base and to capture additional market share by bringing excitement to shoppers with our values. Full year comp sales increased a very strong 5%.

Profitability increased significantly and earnings per share grew double digits, all well above our initial guidance for the year. Importantly, we are confident that we attracted new shoppers to our stores in every country that we operate in. I want to again recognize the excellent execution of our teams and the collective efforts of our associates across the company, which led to this terrific performance in 2025. As we begin 2026, the first quarter is off to a strong start. We have many initiatives planned that we believe will keep driving sales and traffic this year.

We remain confident that in-store shopping is not going away and believe our focus on offering customers an exciting treasure hunt shopping experience every day will continue to serve us well. Additionally, we are always looking at ways to further improve our in-store shopping environment and remain committed to investing in store remodels and new prototypes that we believe will enhance the customer shopping experience. In fact, I believe that our organization does such a great job in this area that it has helped drive the remarkable consistency of comp increases across our store base.

Availability of quality branded merchandise in the marketplace continues to be outstanding and we are in a terrific position to flow a fresh assortment of goods to our stores and online this spring and throughout the year. Longer term, we are convinced that the flexibility of our business and our unwavering commitment to value will continue to be a winning retail formula. I will speak more about our performance and our confidence in gaining additional market share over the long term in a moment. But first, I will turn the call over to John to cover our fourth quarter and full year financial results in more detail.

John Klinger: Thanks, Ernie. I also want to add my gratitude to all of our global associates for their hard work and commitment to The TJX Companies, Inc. this year. Now I will share some additional details on the fourth quarter. As I recap our fourth quarter results, I am going to speak to everything on an adjusted basis, which excludes the net impact from a litigation settlement related to the credit card interchange fees and the related expenses associated with that settlement. Reconciliations detailing the net impact of these settlement-related items on our results can be found in today's press release and on the Investors section of our website. Net sales grew to $17,700,000,000, a 9% increase above last year.

As Ernie mentioned, our fourth quarter consolidated comp sales increased 5%, which was well above our plan and on top of a 5% increase last year. I want to note that our quarterly comp was trending higher prior to the winter storms that swept across North America at the end of the quarter. Importantly, we saw sales pick up again after the storms passed. Our fourth quarter comp was driven by a combination of a higher average basket and an increase in customer transactions. Further, we saw strong comp sales increases in both our apparel and home categories as we have all year long.

Adjusted pretax profit margin, at 12.2%, was up 60 basis points over last year's 11.6% and well above our plan. Adjusted gross margin was 31.1%, up 60 basis points over last year's 30.5%. This increase was primarily driven by a higher merchandise margin and expense leverage on sales, partially offset by unfavorable inventory hedges. Adjusted SG&A was 19.1%, favorable 10 basis points versus last year's 19.2%. Net interest income negatively impacted pretax profit margin by 10 basis points versus last year. All of this led to adjusted diluted earnings per share of $1.43, up 16% over last year's $1.23 and well above our plan.

Fourth quarter adjusted pretax profit margin and adjusted diluted earnings per share were both well above plan. This was primarily due to lower shrink and expense leverage on above-plan sales, partially offset by higher incentive compensation accruals. As for our divisional performance in the fourth quarter, each of our divisions saw comp sales growth of 4% or better and had strong adjusted segment profit margins. Now to our fiscal 2026 results. Once again, for our full year financial results, I am going to speak to everything on an adjusted basis, which excludes the net impact from a litigation settlement related to credit card interchange fees and the related expenses associated with that settlement.

Net sales grew to $60,400,000,000, a 7% increase over last year. Consolidated comp sales were up 5% and driven by both a higher average basket and an increase in customer transactions. Adjusted pretax profit margin was 11.7%, up 20 basis points over last year's 11.5%. Full year adjusted gross margin was 31%, up 40 basis points over last year's 30.6%. This increase includes a 20 basis point benefit from shrink favorability. We once again saw shrink favorability across all of our segments. I want to take a moment to acknowledge the outstanding efforts of our associates who worked hard all year long to drive this improvement.

I am also pleased to share that shrink is essentially back to our pre-COVID level. We believe this speaks to our culture of working to quickly address issues that come up and our commitment and laser focus on fixing them. Full year adjusted SG&A was 19.5%, 10 basis points unfavorable to last year's 19.4%. Net interest income negatively impacted full year pretax profit margin by 10 basis points versus last year. All of this led to full year adjusted diluted earnings per share of $4.73, up 11% over last year's $4.26. Ernie will talk about our full year divisional highlights in a moment. Moving to inventory.

Balance sheet inventory was up 14% and inventory on a per store basis was up 10%. We feel great about our inventory levels and the excellent availability we are seeing in the marketplace. I will finish with our liquidity and shareholder distributions. For the full year, we generated $6,900,000,000 of operating cash flow and ended the year with $6,200,000,000 in cash. In fiscal 2026, we returned $4,300,000,000 to shareholders through our buyback and dividend programs. Now I will turn it back to Ernie.

Ernie Herrman: Thanks, John. I will cover some full year divisional highlights. I am extremely pleased with the strong and consistent sales performance across each of our divisions. All of our businesses delivered comp sales growth of 4% or better this year. Importantly, each division drove increases in customer transactions and attracted new shoppers throughout the year. I truly believe our value proposition appeals to a wide customer demographic across our retail banners, which differentiates us from so many other major retailers. I am convinced that each of our divisions is set up extremely well to continue capturing market share around the world for many years to come. At Marmaxx, overall sales for the full year grew to $36,600,000,000.

Marmaxx's comp sales grew a strong 4%, with increases in both their apparel and home categories. Further, comp sales were up across each of Marmaxx's regions and consistent across all customer income demographics. At Sierra, we were very pleased with their performance as they delivered healthy sales growth while accelerating their store openings across the United States. Additionally, our U.S. online businesses continued to add new categories and brands to deliver even more freshness and excitement for our e-commerce shoppers. As to Marmaxx's profitability, adjusted full year segment profit margin increased to an outstanding 14.4%. Going forward, we are very excited about the opportunities we see to open more stores, attract more shoppers, and increase sales at our largest division.

At HomeGoods, annual sales surpassed $10,000,000,000, a great milestone in this division. Comp sales increased a very strong 5% with broad strength across all regions of the country. During the year, we opened 27 stores for this division, bringing our eclectic mix of home fashions to even more consumers across the United States. As to profitability, HomeGoods' full year adjusted segment profit margin increased to an outstanding 12%. Long term, we see plenty of opportunities for HomeGoods and HomeSense to capture an even bigger share of the United States home market. At TJX Canada, full year sales increased to $5,600,000,000 and comp sales increased an outstanding 7%.

It was great to see consistent and strong performance at all three of our Canadian retail banners, which each delivered similar comp increases. Adjusted segment profit margin on a constant currency basis increased to a strong 13.8%. To our Winners, Marshalls, and HomeSense banners, we are one of the top destinations for apparel and home fashions in Canada. We continue to see a long runway for growth and are excited to further grow our footprint across this country. At TJX International, full year sales grew to $8,000,000,000 and comp sales increased a strong 4%, with strength in both Europe and Australia.

In Europe, we are the largest brick-and-mortar off-price retailer and believe our size and scale allow us to offer consumers an unmatched mix of merchandise at great value. Further, we are on track to open our first stores in Spain this spring, and are excited to deliver our values to more shoppers in Europe. In Australia, sales were once again outstanding and we continue to open stores across the country. As to profitability, I am extremely pleased with the TJX International division's improvement in 2025. Adjusted segment profit margin on a constant currency basis increased significantly to 7.3%. Going forward, we are confident that we can continue to attract more shoppers in each country that we operate in.

We continue to be very pleased with our joint venture in Mexico and minority investment in the Middle East. In Mexico, we have made excellent progress on the merchandising side of the business and continue to see opportunities to further optimize the store assortment. In the Middle East, Brands For Less stores continue to perform well, and they have plans to continue opening stores across that region. We are excited to be participating in the growth of off-price in these regions of the world. Moving on, I would like to highlight some of the key reasons why we are confident that we can continue to grow our company and gain market share around the world well into the future.

First, is our relentless focus on delivering value for our customers every day. Availability of merchandise continues to be exceptional as our team of more than 1,400 buyers source from a universe of approximately 21,000 vendors every year, including thousands of new ones. We have developed very strong relationships with our vendors and believe they look to us to clear their excess inventory and to grow their business and introduce their brands to new customers. This gives us great confidence that we will have plenty of access to goods going forward and that we are in an excellent position to continue bringing shoppers joy and terrific value every time they visit.

Second, we believe our strategy of operating stores across a wide customer demographic will continue to serve us well. With outstanding access to good, better, and best merchandise, we can curate our stores with an assortment that appeals to various income and age demographics. This allows us to reach a broad range of shoppers, which we believe differentiates us from many other major brick-and-mortar retailers. Further, we continue to see an outsized number of new younger customers visiting our retail banners at each of our divisions. All of this gives us confidence that we can continue to open stores in new markets in each of our geographies.

This leads me to my next point, which is the significant opportunity we see to grow our global store base. We see the long-term potential to grow to 7,000 stores with our existing retail banners in our current countries and Spain. We have an excellent track record of opening stores in the right locations in the right markets and are convinced that we will continue to do so. With the long-term opportunity to open 1,700 plus additional stores globally, we see a very strong path ahead for continued global growth. Fourth, we believe we are a retail leader in flexibility. Our business is centered around being flexible, including our buying, our store formats, and our supply chain and systems.

This allows us to quickly pivot to take advantage of categories and trends in the marketplace and get the right goods to the right stores at the right time, which we believe drives shopper excitement when they visit. Going forward, we are confident that our flexibility will allow us to successfully navigate ever-changing macro environments and economics, just as it has throughout our fifty-year history. Lastly, I am convinced that the strength of our talent and our focus on culture have been major contributors to our success and will continue to drive the business for many years to come. I truly believe that the tenure, depth of expertise, and off-price knowledge of our teams are unmatched.

Further, we continue to invest in teaching and training our associates to develop the next generation of The TJX Companies, Inc. leaders. I am confident that our global talent base and consistency of our culture will be tremendous advantages as we continue our growth around the world. In closing, we feel great about our terrific performance in 2025. We are confident in our plans for 2026, and as always, we will strive to beat them. Our value perception remains very strong. I am convinced that our focus on value and delivering an exciting treasure hunt shopping experience will continue to bring joy to shoppers around the world.

I am so excited about the growth opportunities we see in both the near and long term, and I am confident we can achieve them. The entire TJX team is laser focused on our business model to grow our top and bottom lines, and to continue our global growth and to capture additional market share. Now I will turn the call back to John to cover our full year and first quarter guidance and then we will open it up for questions.

John Klinger: Thanks again, Ernie. I will start with our full year fiscal 2026 guidance. We are planning overall comp sales growth of 2% to 3%. For the full year, we expect consolidated sales to be in the range of $62,700,000,000 to $63,300,000,000, up 4% to 5%. We are planning full year pretax profit margin to be in the range of 11.7% to 11.8%, flat to up 10 basis points versus last year's adjusted 11.7%. Moving to full year gross margin, we expect it to be in the range of 31.1% to 31.2%. This would be up 10 to 20 basis points versus last year's adjusted 31%, due to an expected increase in merchandise margin.

We are expecting full year SG&A to be 19.5%, flat versus last year's adjusted 19.5%. We are expecting incremental store wage and payroll costs to be offset by lower incentive compensation accruals this year. We are planning net interest income of $76,000,000, which we expect to delever fiscal 2027 pretax profit margin by 10 basis points. Our full year guidance assumes a tax rate of 25% and a weighted average share count of approximately 1,120,000,000 shares. As a result of these assumptions, we are expecting full year diluted earnings per share to be in the range of $4.93 to $5.20, up 4% to 6% versus last year's adjusted $4.73.

Lastly, I want to mention that we are evaluating the potential impact of last Friday's ruling on tariffs and monitoring the changing tariff environment. That said, our full year guidance assumes that we will be able to offset the tariff pressure on our business this year. Moving to the first quarter. We are planning overall comp sales to increase 2% to 3%, consolidated sales to be in the range of $13,800,000,000 to $13,900,000,000, up 5% to 6%, pretax profit margin to be in the range of 10.3% to 10.4%, flat to up 10 basis points versus last year's 10.3%, gross margin to be in the range of 29.9% to 30%, up 40 to 50 basis points versus last year's 29.5%.

This would be due to an expected favorable inventory hedge comparison to last year and an expected increase in merchandise margin. SG&A to be 19.8%, 40 basis points unfavorable versus last year's 19.4%. This would be primarily due to incremental store wage and payroll costs. We are also planning net interest income of $22,000,000, which we expect to have a neutral impact to our year-over-year first quarter pretax profit margin. Our first quarter guidance also assumes a tax rate of 23.1% and a weighted average share count of approximately 1,120,000,000 shares.

Based on these assumptions, we expect first quarter diluted earnings per share to be in the range of $0.97 to $0.99, up 5% to 8% versus last year's diluted earnings per share of $0.92. Moving to our fiscal 2027 capital plans. We expect capital expenditures to be in the range of $2,200,000,000 to $2,300,000,000. This includes opening new stores, remodels, and relocations as well as investments in our distribution network and infrastructure to support our growth. For new stores, we plan to add 146 net new stores, which would bring our year-end total to well over 5,300 stores. This would represent a store growth of about 3%.

In the U.S., our plans call for us to add 45 net new stores at Marmaxx, 35 new stores at HomeGoods, which includes 11 HomeSense stores, and 24 new Sierra stores. In Canada, we plan to add 13 new stores. At TJX International, we plan to add 19 net new stores in Europe, which includes our first five stores in Spain, and 10 new stores in Australia. Lastly, we are planning about 540 remodels and plan to relocate approximately 40 stores in fiscal 2027. As to our fiscal 2027 cash distribution plans, we remain committed to returning cash to shareholders.

As we outlined in today's press release, we expect that our Board of Directors will increase our quarterly dividend by 13% to $0.48 per share. Additionally, in fiscal 2027, we currently expect to buy back $2,500,000,000 to $2,750,000,000 of The TJX Companies, Inc. stock. In closing, I want to reiterate that we are excited about the growth opportunities we see in the long term. We are in an excellent position to continue to invest in the growth of The TJX Companies, Inc. while simultaneously returning significant cash to our shareholders. Thank you, and now we are happy to take your questions.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please unmute your line and press 1. You will be prompted to record your name. To withdraw your question, you may press 2. Again, press 1 to ask a question. And one moment please for our first question. First question comes from Lorraine Hutchinson. You may ask your question.

Lorraine Hutchinson: Thank you. Good morning. Ernie, can you update us on pricing actions that you have taken? How is the customer reacting to some of the higher ticket prices? And is that reaction any different for different demographics?

Ernie Herrman: Great question, Lorraine. First of all, it is all done along with knowing what the out-the-door retails are at competition around us. Right? So when we, on an existing item, if that price is moving around us, we want to ensure that we are maintaining the appropriate value gap. We could take a pricing action where it is changed. Again, it is not—I want to call out that it has been selective on certain categories or items. Then we have pricing. When you call pricing action, where if you are referring to sometimes, you know, our ticket is going up. Right?

That can also be pricing action related to a change in our mix, or that shows up as maybe an average retail change because our mix is changing. So, for example, we, in Marmaxx for fourth quarter, had a lot of better goods at higher prices. That had nothing to do with what we would have had before. It was a change in the mix. And so there, the prices went up on certain items. So it is a combination of a couple things. We have not seen—I think, Lorraine, when you were asking at the beginning—we have had very consistent success across the board, as you can see from our business. Our turns are representative of our value.

Our out-the-door value is still exceptionally strong. We do the surveys—we always, and I think I have talked about this before—we do surveys to ensure customer perception of the value is still where it— in fact, it has actually improved over the last six months. And the neat thing about our model is we do not dictate, in many cases, the retail chains. We kind of follow the market. So when the market moves down or up on an item, we want to maintain the proportional gap in value—exciting gap in value—and we will adjust and take an action accordingly. So I hope I answered your question there.

Lorraine Hutchinson: Yes. Thank you.

Ernie Herrman: Thank you. To our next question.

Operator: Thank you. Our next question comes from Matthew Boss. Your line is open. You may ask your question.

Matthew Boss: Thanks, and congrats on another nice quarter. So, Ernie, what is your ability to further accelerate your offense globally, if we are thinking about this year? Maybe to take advantage of disruption in the marketplace, whether that is from tariff volatility and what it is doing to sourcing and supply chains or even the consolidation that is happening at luxury retail? And then I have got to ask my near-term question, which is, can you just elaborate on the strong start to the first quarter? Have you seen any moderation relative to the fourth quarter at any of your segments?

Ernie Herrman: That is very good, Matt. Let me start with your first question first. And on the offense. Because, by the way, I cannot—you are like a mind reader here because I was going to talk about some of the things we are doing that I think—we are in a mode right now where the consumer is so open to trying new venues as clearly they have been disappointed in some of their in-store shopping experience or merchandise content at various other retailers. And I believe our teams have taken advantage of that.

And let me give you a few things that are offensive plays, because this is why, when you asked the question, I was thinking, man, this is exactly one of the things I was hoping to talk about. First of all, on offense, we want to continue to drive our top line. Right? And so we feel as though the customer is really open to trying other things. So our marketing—and we talked about this at our last meetings and a couple times during the year—our marketing teams are very aggressive. We are using marketing as an offensive weapon, more than we ever have before.

In fact, I do not know if you have noticed, we have a new campaign in HomeGoods that just launched. We have a new campaign in TJ Maxx that will be, and then Sierra, that are going to be launching in the near term. We have been doing things like we have had Max linked up with the Olympics, had great promotional spots with the Olympics. We are, on all the fronts, we are using marketing mix modeling methodology there to look at where are we driving top line with our marketing approach.

This is a very sophisticated approach that I think I have also talked about before, which the teams have been all over the last few years, but they are ramped up on this even greater so in fiscal 2027 to continue to look at where we are spending and what the creative is like to try to capture additional market share. Secondly, we are going after brands, I would say, in a more aggressive manner than we also have ever had before. We mean more to the branded vendor community than ever, as witnessed by some of the closures you are talking about.

So our teams are doing a lot more regular meetings with some of the key brands through various levels of their management with our management. And that has been something that we are, initially, all the time. It really comes from a lot of the vendors because they want to do business with us. And that is across, Matt, good, better, and best product. So that has been key. And then the other thing—we, John mentioned it when he mentioned remodels, store environment—again, all under the heading of playing offense. So you start with marketing, you want the exciting mix—I want to get them in the stores.

When they are in the store, I want to give them the most exciting value mix possible. That is what we are doing with the branded merchandise market. And, by the way, availability is off the charts. I think I mentioned outstanding, and I know you guys like to have fun with whatever wording we are using, but it is outstanding and off the charts. But in all seriousness, we are having to slow the buyers down to a large degree in every division that we are operating in. So that is telling us something on availability.

But store shopping experience—we are very aggressive about testing new prototypes and being aggressive about refreshing our stores because that is one of the ways John and I talk about it all the time. That is one of the ways we continue to drive consistent comps across all of our regions and stores in the world. When you have 5,000 plus stores, it would be easy to let some of that investing go by the wayside, and you could deteriorate in your comp sales. So, also, another one we play offense on—again, I love your question, sorry I am going on—is store payroll.

So we believe playing offense in our store—I give a lot of credit to our field management, the directors of stores, TJX—all are strong believers in staffing our stores to play offense, get the goods on the floor, take the markdowns aggressively, get the merchandise out where the customers can get at it in a very organized, pleasant shopping experience, get the customers through the register, and I think that is all part of playing offense, and it shines against what some of the other retailers are doing today. So I think that sums up our offense. John? Want to—

John Klinger: Yeah. So, on your second part of your question regarding the strong start, again, a lot of what Ernie has talked about here—just the focus on execution, and customers continue to look for value, and our store locations are a place that they are very pleased when they come in. And so we are just seeing a continuation of just strong performance.

Ernie Herrman: Yeah. And, Matt, to piggyback on John is another thing that we analyze, and the marketing team is also terrific at feeding to John and the information on income demographics, age demographics. Right, John?

John Klinger: Yeah. And—yeah. I mean, certainly, in Q4, very balanced. Very balanced. So it was—we look at basically above $100,000 and below $100,000 in the U.S., and it was the same comp both above and below. Right? And by geography, it was very consistent in the fourth quarter. It is just very consistent performance across all of our divisions.

Ernie Herrman: Another highlight there also is that we skew versus the general population. We skew—and have been because of some of the new customer acquisitions over the last couple years—we are skewing a notch younger than the average customer. You know, when you take 18 to 34 and age 35 to 54, and 55 plus, we skew a little younger than the general population, which I think bodes well for our future.

Matthew Boss: Best of luck. Congrats again.

Ernie Herrman: Thanks, Matt.

Operator: Thank you. Our next question comes from Paul Lejuez. Your line is open. You may ask your question.

Paul Lejuez: Hey. Thanks, guys. SG&A leverage came in a little bit lighter than I think what you expected despite higher sales. So just curious if you could talk about the flow-through and maybe what the offsets—what drove less leverage than you might have expected, if there was something with The TJX Foundation or incentive comp, marketing. And then, second, if you could talk a little bit more about traffic versus ticket, or transaction versus ticket, by segment, and how you are thinking about those metrics as the drivers of that 2% to 3% comp assumption for 2026?

John Klinger: Yeah. So, on your first question, the Q4 SG&A compared to our guidance is essentially the incentive accrual, plain and simple. As far as the traffic and the ticket, both of them were up in the quarter. I would say that across all of our divisions, transactions were up with the exception of HomeGoods, which was essentially flat. Prior to the storm that swept the U.S. late in January, HomeGoods transactions were running up. But when I look at the driver, the bigger impact was the basket, and within that was average retail that did drive that basket increase. And, again, we have seen this over the last couple quarters, so it is nothing new.

We are quite pleased that, again, we continue to see customers—the transactions, the customer traffic through our store. To Ernie's point—you know, between the advertising, the age of the customer, it just—it is leaning into the product mix that we have in our store, and customers are quite happy.

Ernie Herrman: Yes. Paul, I think, to John’s point, in HomeGoods, it was only in Q4. For the year, HomeGoods was still up a little bit in transactions. And I think one of our reasons—and I think you mentioned what is helping, you know, what would we be confident in helping the 2% to 3% on the combination of and ticket—and I think the roots that we look at here—again, we are different from traditional retailers. This good, better, best combination, and the teams and myself were, in fact, yesterday with one of the senior leaders at Marmaxx, we talked about that balance.

And the word balance, I always like to leave you with, is one of the things that I think our teams do the best, which is they balance good, better, best, but they balance, even within those, having the right looks, not having fashion, and balance the basic, and balance contemporary looks in home in a department versus basic traditional looks—things like that. The ticket—we do not purposely top-down drive an average retail situation. We do it off the value and then driven by having good, better, best, and having a mix within each. And that is what gives us a lot of faith that we can meet or actually exceed our going-forward plans.

Paul Lejuez: Yeah. And, Ernie, if you were to exceed that two to three, do you think it is more likely to come from more transactions or ticket? Is there one that you would favor and expect to be a—

Ernie Herrman: It is hard for us to predict that going forward. It is based on, you know, the customers. Yeah. Right now, I would say, without talking about going forward, it is just kind of a mix of all of those. There is not one thing that—if you look over this past year, it was—right, John? It was kind of a mix of ticket and basket and transactions. And I think once again, like, for us, I think that is a good way for us to not plan on any one of those components.

John Klinger: Right. Maybe a combination of them. As long as we are driving the top line. To us, it really does not matter whether it is coming from the basket or the transactions, as long as both are healthy.

Paul Lejuez: Right. Perfect. Good luck.

Ernie Herrman: Thank you, Paul.

Operator: Thank you. Our next question comes from Brooke Roach. Your line is open. You may ask your question.

Brooke Roach: Morning, and thank you for taking our question. How favorable was the stronger AUR in margin delivery in the quarter? And then, looking forward, can you speak to the drivers of merchandise margin improvement that you are forecasting for the year and the most important areas of opportunity that you see there within the business?

John Klinger: Alright. Trying to pick up first. As far as a stronger AUR, you know, we do not parse that out. I mean, we basically said, when we talked about sales, that for the quarter, it was more the basket than the transactions that drove the comp, and within that, it was the average retail that drove that. So we cannot really parse out any more of that. And then, as far as merchandise margin—

Ernie Herrman: Yeah. So, Brooke, you are asking—so, in other words, are you asking how we deliver the merchandise margin improvement, or is that what you are getting at?

Brooke Roach: I am asking what the forward merchandise margin improvement is based on, where you see the biggest opportunity.

John Klinger: Oh, okay. So—well—

Ernie Herrman: One of the biggest opportunities is a couple things going on in the market, which is good for us. First of all, we have the flexibility to bob and weave with a truly glutted market of merchandise, which allows us to wait out which buys are the best buys. So, again, when you have 1,400 buyers in all these locations, so many of the buyers can cover so many categories. And the teams—our merchants—are trained to know that we do not have a commitment to have to have anything in stock.

So when you operate under that premise, our merchants are able to say, I am going to go for the most buy for the customer that delivers the healthy merchandise margin at the same time. And we can negotiate it that way. So, this is—and this is really part of the secret sauce where we are different, I think, than many other retailers because we have so many tenured merchants here. As, again, I mentioned that in my speech, and we have a university, we have training. And, also, our buyers are, most of the time, getting the first call on excess inventories because the market likes to deal with our buyers.

They are straightforward, they are courteous, they are good to deal with, pay on time, fair. Now take—so you take those into account. You have a glutted market. By the way, we are in a very good liquidity position as we enter the year, so I am loving that. So, you know, again, we are off to a strong start sales-wise. The only thing that could make that better, which is what we have right now, is a really strong liquidity positioning across every banner is in good shape on their liquidity. In fact, we have recently talked about that. So that always bodes well.

And then as an aside—and this is not key—is when there is confusion, you know, with the whole tariff thing, or in and out, and generally one way or the other. And I think you covered us long enough to know indirectly, our buyers are very good at navigating through that. And usually, we figure out a way to benefit in terms of our merchandise margin situation when there is confusion out there. Obviously, you know, that is probably going to happen again. So thank you for your question on that, though. I think it is spot on.

And I think, by the way, this is how we also drive top line, not just margin, because those buys benefit us both ways—merchandise margin, but they benefit on driving sales with a more balanced, exciting value mix.

Brooke Roach: Great. Thanks so much.

Ernie Herrman: Thank you.

Operator: Thank you. Our next question comes from Aneesha Sherman. Your line is open. You may ask your question.

Aneesha Sherman: Thank you so much. I have a couple of follow-ups on margin as well. The first one is on HomeGoods. HomeGoods versus Marmaxx, the margin gap has widened in recent years. And I know you have talked about the drivers being freight and fixed cost. Do you see an opportunity for HomeGoods to catch up to Marmaxx-level margins, especially if we see continued relief on freight and potentially some lower tariffs on Asian source markets? And then a quick follow-up on your comments just now on gross margin drivers. Can you talk about what you are assuming for the non-IMU related drivers like shrink, operating leverage, as well as freight in the next year for your gross margin assumptions?

Thank you.

John Klinger: Yes. So let me start with HomeGoods. So we are very pleased with the improvements that we have seen in HomeGoods. So HomeGoods—they leveraged 150 basis points in the fourth quarter, and they leveraged 110 basis points on the year. So really happy with how they have been able to do that. And they have been able to do that with sales leverage, you know, merchandise margin improvement, which is a combination of the buying, the freight favorability that we have seen come through, and, of course, shrink. And then the other thing is they have had a lot of operational improvements as well that we have seen come through.

We are not going to speculate whether they are going to reach Marmaxx levels because Marmaxx continues to go up as well. And so—but, you know, look. They are doing a tremendous job at improving their pretax profit, as they have over the last couple years.

Ernie Herrman: Aneesha, it is—John and I talked about, but recently I was with the HomeGoods team, and I think John would second this. They are so driven, though, to—we do not put a number on it, but it is funny you asked that question because they are driven to try to get as close to Marmaxx as they can without us putting a number on it. Yeah. So, as witnessed by these last couple of years, the incremental bottom line operating margin in that business has to be, I think, in the industry, one of the highest brick-and-mortar home operating margins. And they are proud of it, but I think there is room to go.

But we want—again, to John's point, we are not going to commit to how high is up. I just know they do not—how do I put it? They do not work to just meet these plans, as you can see.

Aneesha Sherman: Okay. Thank you.

Ernie Herrman: Thank you.

Operator: Thank you. Our next question comes from Michael Binetti. Your line is open. You may ask your question.

Michael Binetti: Hey, guys. Thanks for taking our question here. Liked the Olympics content—that was really nice. I am curious, at a high level, how you thought about the macro and building the strategy into the macro this year, or any differences you think are important versus the past few years, when you think about how the consumer has responded to your business with stimulus in the past? Anything that you focus the playbook on to go after that share, or whether you thought about drivers to spending, like no tax on tips and overtime, and how that can be incremental?

Then I am also curious—when we saw you in December, you were talking a lot about being more aggressive in marketing, not necessarily that you would delever it, but curious—I think you do want to grow that, you have seen a lot of success. Maybe just talk to us about where that plays in the leverage profile this year, if there is an opportunity to delever to go after some more top line?

Ernie Herrman: Yes, Michael, great big strategic question, and really part of what I think—when I talked back before when I think it was Matt asking about playing offense—that has, I think, that applies to what you are asking, which is one of the big things we are doing this year, and we really started last year. By the way, when we started expanding into Mexico, for example—BFL—we are bullish on the fact that we have the tenure of these teams here that I keep looking, and the senior team keeps looking, at wanting to leverage that more than we ever have before. So we have this experience.

We have trained up a lot of succession-planned associates that are right behind them that is allowing us to play offense also. I did not mention that earlier when I talked about—to answer Matt's question. So, you know, when John and his team, and when we go to look at the financial plans, and plan out and we look at years out, we say we have a lot of runway to keep growing The TJX Companies, Inc. As witnessed in my script, I mentioned just the current banners and countries we are in, including Spain. We have a lot of room, let alone we have, I think, other room to keep—like Mexico—and grow that business, and our investment in BFL.

But the core business here just has more green space than I think we thought we did. And so I think with the store closures, with the, I would call it the more softer sales in maybe some of what would have been overlapping customer-based competitors, I think that allows us in the macro, to your question, to look at continuing to take more market share. And that is back to kind of Matt's question about playing offense more.

So on all fronts, you are going to see us, in a nice way, as we always try to do culturally, continue to be more aggressive, I think, than we ever have before in driving top line, taking market share, opening stores wherever we think there is the right calculation of, you know, transfer sales, but new store opportunity. And I think every division is figuring out ways to do that, and that is kind of the difference you are asking—has our outlook changed? It is not radical, but I think it has been tweaked a little in the last couple of years. John, did you want to add anything else?

John Klinger: If the customers, through tax benefits, have more in their pocket this spring, you know, we are certainly going to—you know, we are advertising. The advertising is very aggressive as far as showing up where the customers' eyes are. And Ernie talked earlier about the product mix—that good, better, best mix appealing to a broad range of customers. You know, we are going to put our best foot forward and, you know, hopefully see increased market share.

Ernie Herrman: What has been needed is also—we have talked about this, and you know from the meeting a couple months ago—is our brands are even better for gift giving than ever before. I think they are cooler in terms of, whether it is HomeGoods or Maxx or Marshalls or TK Maxx in Europe, Winners and Marshalls in Canada, we are getting more and more gift-giving, I think, purchases across all the different holidays too. And I think that goes along with our image on each of the brands—continues to upgrade—Sierra, same thing.

So I think that is a whole other piece of business that we used to do well fourth quarter and other, but I think we are capturing gift-giving business throughout the year now.

Michael Binetti: Okay. Thanks for the thoughts. Appreciate it. Congrats again.

Ernie Herrman: Thank you.

John Klinger: Thanks, Michael.

Operator: Thank you. Our next question comes from Simeon Siegel. Your line is open. You may ask your question.

Simeon Siegel: Thanks. Hey, good morning, everyone. Really nice job. Ernie, I appreciate your comments on your own ability to work through tariffs. I was curious if you have any thoughts yet on impacts that the uncertainty might have on the vendor and channel inventory going forward? And then, John, I appreciate the shrink commentary. How do you think about that going forward? Sorry if I missed it. Is it just generally neutral at this point? Or is there anything else to keep in mind? Thanks, guys.

Ernie Herrman: Alright, Simeon. Well, in terms of the vendors—and this is so hot off the press, it is hard for me to say. It is so early. We are not exactly sure what the vendors are going to do. In terms of looking back—by the way, in terms of looking forward, that is what is going to be really interesting to see if, you know, some prices come down on certain items with, you know, if tariffs get adjusted on certain categories, and then how does that play out with retail. Again, we are very fortunate in our model because we just kind of—we get to watch what happens at the retail level around us, and we react accordingly.

But my guess is there could be some spots—if a vendor was not doing too well with the category and part of it was due to tariffs, they will probably take a look at those prices again and adjust their prices down where it makes sense. Provided everything—the reason I am hesitant to say anything is we do not know where things are going to actually land long term here. We have some idea, just as everyone around us, I am sure, is watching. That is kind of the best of our ability to guess right now.

John Klinger: Yeah. And then, just getting on to your question about shrink. So the last two years, we have had 20 basis point improvements each of the last two years. And we are—like we said on the call—we are essentially back to where we were pre-COVID. So we have done a lot of work, and the teams have really done an amazing job of creating an environment in the store that is safe for our customers, safe for our associates, and also promotes people to shop and not make it a hassle for people to shop. So areas where we have increased—our shrink methods have actually given us, in many, many areas, an increase in sales.

And so, over the last year, we did things that, again, we believe improved our shrink performance. Those will be annualized this year. And then, currently, the teams are going through all the stuff from last year to see where are some of the other opportunities. We are not taking the foot off the gas here on shrink at all. It is just that, you know, now that we are pretty much back to where we were pre-COVID, we are going to continue to look for wins, but I do not think the wins will be as great as they were as we brought it back to where we were pre-COVID.

Simeon Siegel: Makes sense. Thanks a lot, guys. Best of luck for the year.

John Klinger: Thank you.

Operator: Thank you. Our final question of the day comes from Jay Sole. Your line is open. You may ask your question.

Jay Sole: Great. Thank you so much. Maybe, Ernie, just want to talk about HomeGoods a little bit. You just really dive into that—the 6 comp. You know, are you seeing opportunities in new categories? You are talking about so much opportunity buying—I think people always assume you need apparel. But, you know, are there other things, whether it is, you know, bed, kitchen, bathroom, home, you know, like area rugs, light and lamps—anything that is adding to the store that is new that is driving that comp that you see more potential in, just because of everything that company is doing?

Ernie Herrman: Yes, Jay, great question. First of all, I cannot give specific category information because that kind of puts it out there as to—for others to kind of know, oh, maybe they should go at that. However, what I will tell you is it is very widespread there, which is one reason their business is so healthy across numerous categories.

We are an open book—if you go in the store, you will see, and I think where the HomeGoods team has done an amazing job is going after some of the categories that around us, stores have closed in or downplayed, and so there is this opening need for demand in certain categories that the HomeGoods team has gone after because they have a bit of a captive audience now. If somebody wants a certain—I will not say what the category is—they kind of have to go to HomeGoods. And there is a half dozen of those.

And then when you go to basic—so let me give you basic categories I can talk about that are not—like this is not a news flash. So if you go to basic—bedding, sheets, towels, blankets, comforters—there is less competition out there, and nobody touches the HomeGoods values on utilitarian categories. So whether it is from picture frames to candles to, you know, stationary items, we are kind of a one-stop shop with fashion and functionality at crazy values. And I think the formula, I would say—and, by the way, remember in The TJX Companies, Inc., now, we are over 30% of TJX’s home business. HomeGoods, as you know, hit a monumental mark last year with the $10,000,000,000.

But, John and I always talk about home and TJX as a key strategic advantage for us because we have so many homebuyers that collaborate and are able to put together this very fashion, eclectic, impulse-driven mix. And the neat thing is, in every geography we are in, if you watch all the social media, customers have figured out that we are the most impulse-driven type of home store to shop, which is why I think our HomeGoods shoppers get so excited and find it impossible to only spend $100 when they walk in. So, I realize I cannot give you as many specifics on the exact categories, but I can tell you it is very widespread.

And I give all the credit in the world to our merchants in HomeGoods and our home merchants across the corporation.

Jay Sole: Yep. Got it. Very helpful. Thank you so much.

Ernie Herrman: Thank you, Jay. Okay. That was our last question. Thank you all for joining us today. We look forward to updating you again on our first quarter earnings call in May. Take care, everybody.

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

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