Ladies and gentlemen, thank you for being here. Welcome to The TJX Companies Fourth Quarter Fiscal 2024 Financial Results Conference Call. This call is being recorded today, February 28, 2024. I would now like to hand it over to Mr. Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc. Please proceed, sir.

Thanks, Ivy. Before we begin, Deb 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 Investors 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'll turn it back over to Ernie.

Good morning. Joining me and Deb on the call is John. I want to start today by recognizing all of our global associates for their excellent work in 2023. I truly appreciate their continued commitment to TJX and their focus on our customers. I especially want to thank our store, distribution and fulfillment center associates for their hard work and dedication to our company every day. Now to an overview of our results beginning with the fourth quarter. I am extremely pleased with our very strong finish to 2023. Our fourth quarter sales profitability and earnings per share all exceeded our expectations. Overall comp sales were up a strong 5% and were entirely driven by growth in customer transactions. This is great to see as it underscores our ability to continue gaining market share in all of our geographies. I am particularly pleased that our U.S. businesses, Marmaxx and HomeGoods, continued their very strong sales momentum. Also, it was great to see comp sales growth accelerate versus the third quarter at our Canadian and international divisions. We are confident that our exciting assortments and excellent values resonated with shoppers across all of our retail banners this holiday season. We believe our gift-giving selections offer customers something for everyone on their list, and we see being a gift-giving destination as a year-round opportunity for our business. For the full year, overall sales surpassed $50 billion, marking a milestone for our company. Even more exciting, we still see plenty of opportunities to continue our growth in our markets around the world. For the full year, consolidated comp sales increased 5%. Profitability increased significantly and earnings per share grew double digits, all well above our initial guidance for the year. Importantly, we saw comp sales growth across each of our divisions, again, all driven by increases in customer transactions. We are confident that we gain market share in every geography that we operate in. Our outstanding performance in 2023 is a testament to the sharp execution of our talented associates around the world and their relentless focus on delivering excellent value to our customers every day. Looking ahead, the first quarter is off to a good start. In 2024, we have many initiatives planned that we believe will keep driving sales and attract more shoppers to our stores. Availability of quality branded merchandise in the marketplace continues to be outstanding. We are in a terrific position to continue flowing a fresh assortment of goods to our stores and online this spring and throughout the year. Longer term, we see many opportunities to capture additional market share across our geographies, and we are laser-focused on increasing the profitability of TJX. We are convinced that our flexibility and commitment to value will continue to be a winning retail formula for many years to come. Before I continue, I'll turn the call over to John to cover our fourth quarter and full year financial results in more detail.

Thanks, Ernie. I also want to add my gratitude to all of our global associates for their continued hard work. Now I'll share some additional details on the fourth quarter. As I recap the fourth quarter results, I'm going to speak to everything on a 13-week basis, which excludes the extra week in the quarter. Reconciliations detailing the impact of the extra week on our results and other adjustments can be found in today's press release and on the Investors section of our website. Adjusted net sales grew to $15.5 billion, a 7% increase versus last year. As Ernie mentioned, consolidated comp store sales increased 5%, above the high end of our plan and were entirely driven by an increase in customer transactions. A quick note that on prior calls, we have referred to customer transactions as customer traffic. But for the sake of clarity, we'll use the term customer transactions going forward. Back to the results. In the fourth quarter, our consolidated comp sales increased in both our apparel and home businesses. In terms of divisional sales performance for the fourth quarter, we were pleased to see strong comp sales increases at every division, all driven entirely by customer transactions. At Marmaxx, I also note that we saw comp increases in both our apparel and home categories. Fourth quarter adjusted pretax profit margin of 10.9% was up 170 basis points versus last year. Our adjusted pretax profit margin came in well above our plan primarily due to a higher merchandise margin. This includes a larger-than-expected benefit from shrink and freight, lower markdowns, and better mark-on. We also saw some expense leverage on our above-plan sales. Adjusted gross margin for the fourth quarter was up 340 basis points versus last year. This was driven by a higher merchandise margin, including a significant benefit from lower freight costs and shrink, strong mark-on, and lower markdowns. Fourth quarter adjusted SG&A increased 190 basis points versus last year, primarily due to higher incentive accruals and incremental store wage and payroll costs. Adjusted net interest income benefited fourth quarter adjusted pretax profit margin by 10 basis points versus last year. Lastly, we were very pleased that adjusted diluted earnings per share of $1.12 were well above our expectations and up 26% versus last year. Now to our fiscal '24 results. Once again, for the full year financial results, I'm going to speak to everything on a 52-week basis, which excludes the extra week in the fiscal year. Adjusted net sales grew to $53.3 billion, a 7% increase versus last year. Full year consolidated comp store sales were up 5%, entirely driven by customer transactions. We were very pleased to see mid-single-digit comp sales increases in both our apparel and home businesses. Adjusted pretax profit margin of 10.9% was up 120 basis points versus last year's adjusted 9.7%. Adjusted gross margin for the full year was 29.9%, up 230 basis points versus last year's 27.6%, primarily driven by a significant benefit from lower freight costs as well as strong mark-on and 10 basis points of shrink favorability. Shrink was an area that we were laser-focused on as an organization all year long. I want to recognize and thank all the associates who worked extremely hard on our initiatives throughout the year. Importantly, we managed our in-store initiatives while delivering a very strong top line and providing a pleasant shopping experience for our customers. We remain focused on shrink and continue to look for ways to improve this area going forward. Full year adjusted SG&A was 19.3%, up 140 basis points versus last year's 17.9%. This was primarily due to incremental store wage and payroll costs and higher incentive accruals. Adjusted net interest income benefited full year adjusted pretax profit margin by 30 basis points versus last year. Lastly, full year adjusted earnings per share were $3.76, up 21% versus last year's adjusted $3.11. Moving to inventory. Balance sheet inventory was up 3% versus fiscal '23. We are happy with our inventory levels and the plentiful availability we see in the marketplace. We are well positioned to flow fresh assortments to our stores and online this spring. I'll finish with our liquidity and shareholder distributions. For the full 53-week year, we generated $6.1 billion in operating cash flow and ended the year with $5.6 billion in cash. In fiscal '24, we returned $4 billion to shareholders through our buyback and dividend programs. Now, I'll turn it back to Ernie.

Thanks, John. I'll pick it up with some full year divisional highlights. As we saw with our strong fourth quarter sales, every division delivered comp increases for the full year, with customer transactions driving the increases across the businesses. Again, we believe this is a strong indicator of our ability to continue gaining market share and it underscores our wide customer demographic. Beginning with Marmaxx. Overall sales well exceeded $30 billion. Comp store sales increased a very strong 6%. We also surpassed 2,500 total T.J. Maxx and Marshalls stores. Marmaxx's apparel and home categories, both comp up for the year. Further, we saw consistently strong comp sales increases across regions and income demographics. As to Marmaxx's profitability, we were extremely pleased to see full year adjusted segment profit margin improved significantly to 13.7%. As we look ahead, we are very excited about the opportunities to see that we see to grow our customer base, drive sales, open new stores and increase the profitability of our largest division. At Sierra, which is reported with Marmaxx, we were pleased with the continued sales growth. At our online businesses, we added new categories and brands throughout the year to deliver the same freshness and excitement online as we do in our stores. At HomeGoods, annual sales grew to nearly $9 billion and comps grew 3%. It was great to see the home business return to positive comp sales trends. We are particularly pleased with the acceleration we saw in the second half of the year, with comp sales increasing high single digits. Similar to Marmaxx, we saw consistent performance across regions and income demographics. HomeGoods adjusted profitability also improved significantly to 9.4% and getting closer to our goal of returning this division to a double-digit profit margin. During the year, we opened a combined 34 HomeGoods and HomeSense stores. Long term, we see exciting potential to bring our eclectic mix of home fashions to even more consumers across the United States. Moving to TJX Canada. Full year sales were $5 billion and comp store sales increased 3%. Adjusted segment profit margin on a constant currency basis was 14%. With more than 550 stores across Canada, we are one of the largest apparel and home retailers in the country. We are a top destination for consumers seeking branded merchandise at amazing value. We continue to see opportunities to expand our footprint across Canada and attract new shoppers to all three of our banners. At TJX International, full year sales approached $7 billion and comp store sales were up 3%. Adjusted segment profit margin on a constant currency basis was 4.6%. As a reminder, in the second quarter, this division's profitability was significantly impacted by a reserve related to a German government COVID receivable. In Europe, we believe our sales growth outperformed many other major brick-and-mortar apparel retailers in a difficult economy. Australia delivered very strong sales growth, and we continue to open stores in new markets. Going forward, we are confident that we can grow our retail banners in each country that we operate in and are highly focused on improving this division's profitability. Going forward, I am confident that we are well positioned to continue our growth around the world and in many kinds of economic and retail environments. Let me briefly remind you of the key characteristics of our business that we believe are tremendous advantages. First is our relentless focus on offering our shoppers great value on every item every day. For us, value means delivering consumers the right combination of brand, fashion, price and quality as always. Second is the flexibility of our business model that allows us to shift our buying, distribution and store mix to quickly react to the hottest trends in the marketplace and changing consumer preferences. Further, the globalness of our business allows us to create a differentiated treasure hunt shopping experience in every country that we operate in. Third, we successfully operate stores across a wide customer demographic. Our ability to offer a differentiated mix of good, better and best merchandise at each of our stores allows us to appeal to value-conscious shoppers across a broad range of income demographics. Further, each of our divisions continue to attract an outsized number of younger customers to its stores, which we believe bodes well for the future. Next, we are extremely confident that there is more than enough inventory available in the marketplace to support our growth plans. In 2023, our more than 1,300 buyers source goods from a universe of more than 21,000 vendors, including thousands of new ones. As we continue to grow our top line, we believe we become even more appealing to vendors as we offer them an attractive way to grow their business. Fifth, we continue to see opportunities for store growth around the world. We believe we can grow our global store base by at least another 1,300-plus stores over the long term with just our existing banners in our current countries. Last, but certainly not least, is our exceptional talent and strong culture. I truly believe the depth of off-price knowledge and expertise and the longevity of our talent within TJX is unmatched. We continue to invest in teaching and training our associates to develop the next generation of leaders within our company. Finally, I am so proud of our culture, which I believe is a major differentiator and another key component of our success. Turning to corporate responsibility. Our teams across the company did great work on our initiatives in each of our four pillars: workplace, communities, environment and responsible business. Our 2023 global corporate responsibility report summarizes our efforts and progress within this work, as I shared last quarter. Our value mission extends to our corporate responsibility efforts, including supporting our associates, giving back in our communities, helping mitigate our impact on the environment and operating our business ethically. I'm pleased to share that in fiscal 2024, we supported more than 2,000 nonprofit organizations globally through our TJX foundations including nonprofit partners in all 50 states within the United States. Through our grant funding and in partnership with our generous customers, we provided more than 30 million meals through our nonprofit partners to people experiencing food insecurity. And our associates across the globe continue to be engaged in this work, running dollar donation campaigns in our stores, participating in our associate-nominated grants program, helping to build homes for those in need, serving as career coaches for students and more. These are just some examples of work our teams are doing in our communities, and we invite you to visit tjx.com to learn more. Summing up, we are very proud of our team's performance in 2023 and are in a great position as we enter 2024. We are confident in our plans this year, and as always, we'll strive to beat them. We remain committed to investing in our business to support our future growth. Longer term, we believe that the combination of our key strengths and history of strong execution sets us up extremely well to continue our successful growth around the world. I am convinced that plenty of opportunities remain to drive sales, increase profitability, and capture additional market share going forward. Now, I'll turn the call back to John to cover our full year and first quarter guidance. And then we'll open it up for questions.

Thanks again, Ernie. Now to our fiscal '25 guidance beginning with the full year. We are planning overall comp store sales growth to be up 2% to 3% in fiscal '25 over a 5% comp increase in fiscal '24. For the full year, we expect consolidated sales to be in the range of $55.6 million to $56.1 billion. We're planning full year pretax profit margin to be in the range of 10.9% to 11%. This would be flat to up 10 basis points versus fiscal '24 adjusted pretax profit margin of 10.9%. Moving to full year gross margin. We expect it to be in the range of 30% to 30.1%, a 10 to 20 basis point increase versus fiscal '24 as adjusted gross margin of 29.9%. We expect this increase to be driven by a higher merchandise margin partially offset by our supply chain investments. We're planning for both freight and shrink to be flat versus fiscal '24. For full year SG&A, we're expecting it to be approximately 19.3% and flat to last year's adjusted SG&A. We're planning incremental store wage and payroll costs to be offset by lower incentive compensation costs and a benefit from items that negatively impacted us last year. We're planning full year net interest income of about $118 million, which would delever fiscal '25 pretax profit by about 10 basis points. For modeling purposes, we're currently assuming a full year tax rate of 26.0% and a weighted average share count of approximately 1.14 billion shares. As a result of these assumptions, we expect full year earnings per share to be in the range of $3.94 to $4.02. This would represent an increase of 5% to 7% versus last year's adjusted earnings per share of $3.76. Moving to our first quarter guidance. We are planning overall comp store sales growth to be up 2% to 3%. We expect first quarter consolidated sales to be in the range of $12.4 billion to $12.5 billion. We're planning first quarter pretax profit margin to be in the range of 10.5% to 10.6%, an increase of 20 to 30 basis points versus last year. Next, we expect first quarter gross margin to be approximately 29.8%. This would be an increase of 90 basis points versus last year's primary due to a higher merchandise margin which includes the annualization of lower freight costs from last year and favorable mark-on, partially offset by supply chain investments. We're expecting first quarter SG&A to be approximately 19.5%, up 50 basis points versus last year. We expect this increase to be primarily driven by incremental store wage and payroll costs. For modeling purposes, we're currently assuming a first quarter tax rate of 25.8%, net interest income of about $37 million and a weighted average share count of approximately 1.14 billion shares. As a result of these assumptions, we expect for our first quarter earnings to be in the range of $0.84 to $0.86, up 11% to 13% versus last year's $0.76. Moving on to our fiscal '25 capital plans. We expect capital expenditures to be in the range of $2 billion to $2.1 billion. 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 about 141 net new stores, which would bring our year-end total to almost 5,100 stores. This would represent a store growth of about 3%. In the U.S., our plans call for us to add about 45 net new stores in Marmaxx and 40 stores at HomeGoods, including 17 HomeSense stores. At Sierra, we plan to add 26 stores. In Canada, we plan to add 10 stores. And at TJX International, we plan to add 15 net stores in Europe and 5 net stores in Australia. Lastly, we also plan to remodel about 480 stores and relocate approximately 40 stores in fiscal '25. As to our fiscal '25 cash distribution plans, we remain committed to returning cash to our shareholders. As we outlined in today's press release, we expect our Board of Directors will increase our quarterly dividend by 13% to $0.375 per share. Additionally, in fiscal '25, we currently expect to buy back $2 billion to $2.5 billion of TJX stock. Looking beyond FY '25, we continue to believe that on a 3% to 4% comp increase, our pretax profit margin can be flat to up 10 basis points. As I've said before, this assumes no outsized expense headwinds. Also, our plans do not contemplate assumptions for macro factors such as geopolitical events, foreign exchange volatility or consumer behavior. In closing, I want to emphasize that we are laser-focused on growing our top line, increasing profitability and will strive to exceed our plans. We are in an excellent position, both operationally and financially to take advantage of the opportunities we see to further grow our business while simultaneously returning significant cash to our shareholders. Now, we are happy to take your questions. As we do every quarter, we're going to ask that you please limit your questions to one per person so we can keep the call on schedule and answer as many questions as we can. Thanks, and now we'll open up for questions.

Our first question comes from Paul Lejuez from Citigroup.

You've got your margin guidance overall for the year, but I'm curious how you're thinking about profit margins at each of the segments this year? Where do you have the most opportunity? And what is assumed in your guidance, which segments are up, which are down? And then, Ernie, just having quick comments on the Macy's news yesterday, how you're thinking about the store closure opportunity, what that might mean for you guys?

Yes. Paul, to start off, on this call, we're not going to get into the detail by division, just to say that we're very confident in the plans we have to execute them, and we're pleased to be increasing 10 basis points on a 2% to 3% comp.

Yes. Paul, regarding the Macy's store closures, this situation is somewhat analogous to other closures we've discussed in recent years. With the Macy's closures, there is considerable overlap in the categories that align with our businesses. Therefore, we see this as an additional market share opportunity, depending on the specific categories and locations involved. While we may not capture all of that market share, we typically estimate that we will gain some of it. We've approached this similarly with other stores that have closed in the past 18 to 24 months. I also want to commend our planning and allocation team, as they analyze trends effectively. Our system is advanced enough to assess the impact of nearby store closures on our HomeGoods and Marmaxx locations, allowing us to monitor these trends and seize market share opportunities. Additionally, while this may not have been your primary question, I would like to highlight that the closures are increasing the importance of our vendor relationships. As brick-and-mortar competition decreases, our merchants are gaining more leverage with vendors. This could lead to improved merchandise margins as we continue to enhance our buying capabilities over time. I felt it was important to mention this in relation to the store closure discussion.

Next, we'll go to the line of Brooke Roach from Goldman Sachs.

Ernie, you talked a little bit about this already about the opportunity for better buying which could help merch margin. But I was hoping you could contextualize the drivers of merch margin expansion that you're forecasting this year as well as the drivers of expansion that you see on a multiyear basis. Is this year a function of mark on markdown or further price increases, where do you see the most opportunity?

Yes. Great question, Brooke. And John, are you going to...

Yes. I mean we see a combination of both mark-on and markdown favorability in FY '25. So we're quite pleased to see that.

I would say, Brooke, to get a bit more specific regarding your question about the mark on, which is still a vital component for us, it's essentially a combination of factors. I touched on part of this with Paul's question about improving our buying practices. Additionally, availability, which I mentioned in the script, remains strong overall, though it does vary by category and vendor. Ultimately, we have more goods available than we can manage, and we're still somewhat restricting our merchants. I appreciate what has been happening—our buyers have become increasingly important to our vendor community. They interact with vendors courteously yet directly, enabling them to continue improving their purchasing season after season. As we gain market share, vendors notice their products being showcased in our stores alongside an eclectic mix of increasingly better brands, which motivates them to collaborate with our buyers even more than in the past. This positive trend has been developing for several years now, so we feel optimistic about the mark on as it relates to better buying. Regarding the retailing of goods, we still see opportunities. We’ve initiated selective retail adjustments over the last few years and believe there is significant potential remaining. Our value perception is very strong across all our brands, and as evidenced by our sales momentum, customers are responding exceptionally well to the values we offer in-store. In relation to markdowns, I think opportunities for mark-ons persist through both improved buying and retail strategies, creating medium- to long-term potential. I hope that addresses your question.

Next, we'll go to the line of Matthew Boss from JPMorgan.

And congrats on another great quarter. So Ernie, with holiday comps driven by transactions, could you elaborate on new customer acquisition and market share opportunity that you see. And just how do you think your apparel and home assortments are positioned in the spring, given the good start that you cited? And then maybe, John, on the margin side, just a follow-up. I mean, with margins now exceeding pre-pandemic is there any change to the historical margin flow-through on incremental of plan sales? It sounds like Ernie walked through a number of drivers, but just thinking about incremental sales and flow through in the model?

Yes, Matt, that's a great question. First, let's address new customer acquisition. We are pleased with the continuing trend of attracting younger customers, which aligns with our goals and is promising for the future. As I mentioned earlier, we are also focused on encouraging more visits from our existing customers because increasing visits is a significant driver of market share. If we can generate just one additional visit from 10% of our customers, it would be a substantial gain. So, while we are actively seeking new customers and are encouraged by the younger demographic, we're equally focused on increasing visits. Our marketing team has been doing outstanding work on creative strategies for this year, and I'm excited about the messaging we have planned across all our brands. Recently, I held marketing meetings with various divisions, and we are pleased with the messaging, which includes educating new customers about our pricing. It's important to highlight that we have a balanced demographic representation in relation to the U.S. population, both in age and income. We notably over-index in the 18 to 34 age group, which is a positive sign for the future. In terms of income demographics, our customer base is well-distributed across categories, with a slight skew towards those earning over $50,000. So, great question; we've invested considerable time in this area. Now, regarding the second part...

Yes. I would just say that our sales performance in the fourth quarter was very consistent across our income demographic bands, particularly in the U.S. divisions. Regarding the incremental sales flow through, it aligns well with our previous statements. We see our leverage point around the 3% to 4% comparable sales, as noted earlier. I don't believe anything has changed in that regard.

Their apparel at home has been affected by recent weather patterns across the country, which impacted our comparable sales during the initial weeks of February, though we are within our guidance range. However, as weather normalized in the last couple of weeks, our business improved significantly, leading to much better comparable sales from week three onward. We are pleased with our performance despite the weather's challenges. In terms of our home business, we view it as having a large opportunity for market share, especially since our approach differs from that of competitors. We offer unique fashion items and replenishable goods, which continue to draw steady traffic to our home goods section. HomeGoods, in particular, presents an eclectic shopping experience that encourages impulse buying and allows us to capture a significant market share. Our team is well-positioned to capitalize on this, and this strength extends beyond HomeGoods, as our whole home area across T.K. Maxx, winners, and Marshalls in Canada is performing well as we enter spring.

Yes. And Matt, let me just add on to what I was talking about as far as the incremental sales flow-through. So as we said in the past, it's for every point in comp, 15 basis points. And again, unchanged from what we've been saying.

Next, we'll go to the line of Lorraine Hutchinson from Bank of America.

Ernie, I was hoping to get your outlook for pricing for this year. Do you still see an opportunity for like-for-like price increases throughout the assortment? And then also, how will mix factor into your outlook for total AUR in fiscal '25?

Certainly. We still see opportunity for like-for-like pricing increases. Our team regularly conducts competitive shopping, and they have identified certain items where we could raise prices. These changes will be subtle and won't be noticeable because we're implementing them selectively across the assortment. It’s not widespread, but there are clear opportunities to make specific adjustments throughout the store. Many other retailers have increased their prices and have not reduced them, even with moderated inflation. A lot of costs remain embedded in various businesses, and I believe this trend will persist for some time, beyond just this season or year. Regarding the product mix, we continuously pursue the latest trends. Currently, we don't anticipate significant changes to our average unit retail (AUR). We are focusing on popular categories while scaling back on others that are underperforming. We adapt quickly to trends, and we see continued strength in certain categories that we aimed to maximize last year. Our current visibility suggests that the AUR will remain stable. We don’t approach this from a top-down perspective, so our insights indicate that there won’t be much change.

Next, we'll go to the line of Jay Sole from UBS.

I'd like to ask about maybe some of the smaller banners. Just on HomeSense, there's a lot of talk in the market that some home categories broadly across the U.S. aren't doing that well. But I've said a couple of times, Home is doing really well. Can you just talk about HomeSense? How that's doing, what your store opening plans for next year are? And also just because you mentioned on the script, this Sierra Trading Post, do you plan to open more Sierra Trading Post? And can you give us a little bit more color on what you're seeing in that banner?

Definitely. John is reviewing the stores. I want to highlight one thing about the HomeSense mix. We make adjustments as we go along, similar to what I mentioned to Lorraine. We follow where our customers are showing preference. Our model supports this flexibility, and our teams have the experience to manage it. We began this process in the fourth quarter, with the HomeSense team starting to modify the mix to focus more on trends that are currently popular, rather than categories that are significant but not trending strongly. Since making those adjustments, our HomeSense trend has improved significantly. Additionally, we've been pleased with our Sierra sales trend throughout last year, which is why we're taking an aggressive approach with our store comps in both cases.

Yes, we are very pleased with what we are seeing in our seed businesses. We are adding 17 HomeSense stores and 26 stores in Sierra. Additionally, we are also very pleased with the performance in Australia, where we are adding five stores. Overall, we are quite satisfied with the performance of these businesses.

I will add that Jay, because we don't get to talk about the small businesses often, so that's good.

Next, we'll go to the line of John Kernan from TD Cowen.

John, you talked about unit growth within the guidance in fiscal '25. And just within the context of your long-term store targets and also some of the trends within new store productivity as you open new Marmaxx and HomeGoods stores. How should we think about real estate availability also the long-term outlook for stores?

Yes, currently our assessment shows that the total potential remains unchanged at just under 6,300 stores. When it comes to store availability, we focus on ensuring that the stores we open across all our brands are the right fit for us. We're not strictly aiming for a specific number; instead, we prioritize stores that integrate well into our overall mix. We're pleased with their performance once they open. Additionally, we find that relocating stores is beneficial. This year, we plan to relocate 40 stores, finding better locations within the trading areas as leases come due. As a result, we see a notable improvement in performance after these relocations. In Europe, particularly in Germany and the U.K., we identify opportunities for more relocations. In the U.S. and Canada, with more department store closures, we see chances to open new stores in those areas, filling the gap left behind. This outlines our strategy for store growth moving forward.

Understood. I guess 1 quick follow-up would be just on other categories outside of apparel, home, you spoke about quite a bit on the prior question. Just what about beauty. It feels like it's much more elevated in-store than has been in the past. What's the opportunity within beauty and the elevation of that category?

Yes, I'll respond to that, John. The beauty business is clearly performing well, as indicated in our presentation. We see significant potential for growth in this area and are actively pursuing it. We've improved the presentation and expanded the assortments. Beauty is certainly a prominent category, but we also recognize that health and wellness, along with other related categories, contribute to this trend. While beauty stands out, the positive momentum extends to several other categories in our store. We've discussed this previously, and I want to emphasize that our stores offer a high degree of flexibility. As we enhance the beauty section, we've maintained the ability to adapt other departments around it, which is advantageous. Our buyers and planning teams can respond quickly to changes in demand without requiring extensive labor or capital for store modifications since we don’t have fixed walls. Thank you for the great question.

Next, we'll go to the line of Alex Straton from Morgan Stanley.

Perfect. I wanted to focus on the HomeGoods real quick here. So ended the year at just under a 10% margin. I was wondering if you could speak to kind of what's constraining that business below your long-term goal of low double digits and when you think it gets there. And then secondly, just on the ability to take market share over time. Just wondering if there's any color you could provide on particular categories or changes in the market landscape that are going to enable that going forward.

Yes, I mean it's a couple of things. I mean HomeGoods was impacted by freight more than some of the other divisions. But for HomeGoods, it's about continuing to drive that top line sales growth, while well, looking at the cost structure of that freight and continuing to try to be as efficient as possible on that freight line. The HomeGoods team executes very, very well, and it's just about continuing to focus on execution, drive that top line and be as efficient as we can.

Alex, when discussing margin improvement, one key factor is the opportunity for market share and sales growth that we are confident we possess. Looking at our performance in HomeGoods, the contrast between the first and second half of the year has been significant. In Q4, it was evident how strong HomeGoods sales trends are compared to competitors. Historically, we've seen solid performance in home goods and home trends, but recently our outpacing of competition has been more pronounced. This indicates that market share is highly contestable. The landscape offers us opportunities as both e-commerce and brick-and-mortar players in the home sector create additional chances for growth due to their operational execution and lack of innovation. HomeGoods is truly one of the most thrilling shopping experiences available, and it's garnered attention on social media platforms and talk shows, adding to its appeal. Customers often find themselves spending more than they intended, and this buzz contributes to our optimism. Our corporate structure enables significant collaboration among home merchants, reinforcing our positive outlook on the total TJX home business. This year, we anticipate that over a third of our business will derive from home goods, and we expect this percentage to grow in the coming years, positioning us for continued success and increased customer traffic at TJX.

Next, we'll go to the line of Michael Binetti from Evercore ISI.

Congratulations on a fantastic quarter. I would like to inquire about the margins. You've addressed this a bit today, but it's impressive to see the profitability you're achieving, especially as competitors re-evaluate their store strategies and consider closing some locations. Regarding Marmaxx, this was a 14% to 15% margin business at its peak, and with labor and supply chain stabilizing now, along with the pricing options available that weren't there before COVID, are there underlying reasons why Marmaxx might be in a structurally stronger position long-term, given that it's now exceeding 2019 levels? Additionally, John, you earlier mentioned that the long-term same-store sales growth is expected to be flat to 10 basis points leveraged on the 3% to 4% growth. This year seems to be flat to 10 basis points on a comp of 2% to 3%, which is slightly better than last year, but you expect it to normalize next year. If by mid-year you're running above the 2% to 3% growth again, is there any reason that wouldn’t translate into a better rate for comp than the 15 basis points you discussed?

Yes, I will address the last part of your question first. We did experience some one-time challenges last year, such as the incentive accruals and homegoods.com, which negatively affected us and helped offset what we are seeing as ongoing wage pressure. Consequently, we were able to achieve results flat to up 10% on a 2% to 3% basis compared to a 3% to 4% expectation. Does that make sense?

Yes, it does. In this year, does the flow-through remain the same in terms of potential upside, or is there a different margin profile?

That's 15 basis points is applicable in fiscal year '25 for every point of comp opportunity. Regarding Marmaxx, there is a 13.7% pretax profit. We experienced a significant improvement over the year, increasing by 100 basis points, largely due to lower freight rates. Although freight rates have not returned to the levels seen in fiscal year '20, we are still 100 basis points lower than those figures. We have been able to offset some of this challenge through merchandise margin improvements. As mentioned previously, we do not expect freight costs to revert entirely due to wage increases in domestic freight, impacting rail and truck workers particularly. We are, however, actively seeking ways to enhance our freight efficiency, which is where we see future opportunities. Similar to our discussions about HomeGoods, Marmaxx also relies on strong execution, driving top-line growth, and continuing to enhance merchandise margins through better purchasing.

And for our final question, we'll go to the line of Marni Shapiro from Retail Tracker.

Congratulations on an excellent year. Many of my questions have already been addressed, but I would like to focus on a smaller aspect of your business. Can we discuss your credit card business? During my visits to your stores, I've noticed some associates offering credit cards. What percentage of your sales comes from your store credit cards? Is there potential for growth in this area? Has data collection been beneficial for you? Is there potential for a loyalty program, or is that unnecessary because customers are so engaged that loyalty isn't a factor? Could you elaborate on this aspect of your business, as it's not something you typically discuss?

Yes. Regarding our credit card, we don’t disclose the transaction amounts. However, I can share that our penetration isn’t as high as some other retailers who provide incentives for using their cards. Our approach focuses on maintaining the everyday value for our customers, and we prefer not to encourage them to wait for discounts to use the credit card. We are committed to ensuring that our messaging surrounding the model remains unaffected. That said, the credit card does allow customers to earn coupons, which brings them back to our stores. We view this as a positive driver for customer traffic. Additionally, it’s satisfying for customers to receive those coupons. While there have been discussions around potential delinquencies or reduced late fees impacting us, we are less affected by these issues compared to other retailers that rely more on credit card transactions. We have been increasing our penetration over the years. Although we are not at the level of other retailers with their credit card programs, our numbers are significantly higher than they were a few years ago. Shoppers tend to explore our different brands more and remain loyal, which positively impacts our sales. As mentioned, using the credit card is the only way to receive any type of rebate from us, which encourages additional visits. That's why we emphasize this in-store; we aim to continue growing this percentage. All right. Well, I think 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. Thank you, everybody.

Ladies and gentlemen, that concludes your conference call for today. You may disconnect at this time, and thank you for participating.