J.B. Hunt Transport Services Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 16, 2023

There are 12 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to The TJX Companies Second Quarter Fiscal 20 24 Financial Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Call.

Operator

As a reminder, this conference call is being recorded Call, August 16, 2023. I would like to turn the conference call over to Mr. Ernie Herrmann, Chief Officer and President of The TJX Companies Inc. Please go ahead, sir.

Speaker 1

Thanks, Sheila. Before we begin, Deb has some opening comments.

Speaker 2

Call. Thank you, Ernie, and

Speaker 3

good morning. The forward looking statements we make today about the company's results and plans are subject to risks and uncertainties that could cause the call. Thank you, Mr. Chairman. Thank you, Mr.

Speaker 3

Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman.

Speaker 3

Call. Call. Any recording, retransmission, reproduction or other use of the same for profit or otherwise without prior consent of TJX call is prohibited and a violation of the United States copyright and other laws. Additionally, while we have approved the publishing of a transcript of this call by a third party, call. We take no responsibility for inaccuracies that may appear in that transcript.

Speaker 3

We have detailed the impact of foreign exchange call on our consolidated results and our international divisions in today's press release and the Investors section of our website, call. Reconciliations of other non GAAP measures we discuss today to GAAP measures are also posted on our website, call. .Com in the Investors section. Thank you. And now I'll turn it back over to Ernie.

Speaker 1

Call. Good morning. Joining me and Deb on the call is John Klinger. I'd like to begin today by once again recognizing our global call. Thank you for their dedication to TJX.

Speaker 1

It is their hard work that brings our business to life every day for our customers. Call. I want to extend a special thank you to our store, distribution and fulfillment center associates for their continued very hard work call and commitment to our company. I want to take a moment on the wildfires in Maui. Call.

Speaker 1

We are grateful that our associates in Maui and the rest of Hawaii are safe and at the same time are deeply saddened by the devastation and loss. Call. To help with the relief efforts on the ground, we have made a donation to the Maui Food Bank and our local teams are donating essential supplies. Call. Now to our business update and second quarter results.

Speaker 1

I am extremely pleased with our 2nd quarter performance as call. Sales, profitability and earnings per share were all well above our plans. I want to highlight that customer traffic call drove our 6% overall comp sales increase and it increased at all of our divisions. As a reminder, for us, call. Customer traffic represents the number of customer transactions.

Speaker 1

I am particularly pleased with the performance of our largest division, Marmaxx, call, which delivered high single digit increases in both comp sales and customer traffic. Our overall apparel and accessories call. Our overall home sales significantly improved and returned to positive comp sales growth. Call. Clearly, our terrific mix of branded fashionable merchandise and great values resonated with shoppers when they visited call.

Speaker 1

In terms of profitability, both pre tax profit margin and earnings per share call increased significantly versus last year. Importantly, merchandise margin continues to be very healthy. Call. With our above planned sales and profitability performance in the second quarter, we are raising our full year outlook for comp sales, call. John will talk to this in a moment.

Speaker 1

Call. We are very pleased with the continued momentum of our business and the excellent execution of our teams across the company. Call. They have been laser focused on driving sales and traffic and improving profitability. The 3rd call.

Speaker 1

The quarter is off to a very strong start and we feel great about our plans for the remainder of the year. The marketplace is loaded call. With outstanding buying opportunities and we are confident that we will continue to offer a terrific mix of brands call and an outstanding assortment of gifts to our shoppers during the fall and holiday selling seasons. Call. We are convinced that our differentiated treasure hunt shopping experience and excellent values will continue to serve us well and allow us to call to ensure additional market share across our geographies for many years to come.

Speaker 1

Before I continue, I'll turn the call over to John to cover our Q2 financial results in more detail.

Speaker 4

Thanks, Ernie, and good morning, everyone. Call. I also want to add my gratitude to all of our global associates for their continued hard work. I'll start with some additional details on the 2nd quarter. Call.

Speaker 4

As Ernie mentioned, our overall comp store sales increased 6%, well above the high end of our plan and were entirely driven by call. We were very pleased to see that both comp store sales growth and customer traffic call. On sales was largely offset by an increase in units with shoppers putting more items into their cart. Call. This is in line with what we have seen in our business historically.

Speaker 4

Our overall apparel business, including accessories, call. Continued its momentum with high single digit comp increase. Overall, home comp sales were up mid single digits. Call. TJX net sales grew to $12,800,000,000 an 8% increase versus the 2nd quarter call of fiscal 2023.

Speaker 4

2nd quarter consolidated pre tax margin of 10.4% was up 120 basis points versus last year. This was well above our plan due to a bigger benefit than we call expected from lower freight costs as well as expense leverage on our above planned sales. Gross margin was up 2 call. This increase was driven by a higher merchandise margin due to the significant benefit from lower freight costs. Call.

Speaker 4

This year over year freight benefit was primarily driven by lower rates as well as a benefit call from our freight initiatives and the remainder of our year end accrual adjustment. Call. Gross margin also benefited from our inventory and fuel hedges and expense leverage on a 6% comp increase. Call. Our year over year shrink accrual and supply chain investments were headwinds to gross margin in the 2nd quarter.

Speaker 4

Call. 2nd quarter SG and A increased 170 basis points due to a combination of factors. These include higher incentive accruals call due to above plan results, a reserve related to a German government COVID program receivable, incremental store wage and payroll costs call and a contribution to the TJX Foundation. Net interest income benefited pretaxprofitmargin by call. 40 basis points versus last year.

Speaker 4

Lastly, we were very pleased that earnings per share of 0.85 conference call. Were up 23% versus last year and also well above our expectations. Call. Now moving to our 2nd quarter divisional performance. At Marmaxx, 2nd quarter comp store sales increased an outstanding 8% call entirely driven by customer traffic.

Speaker 4

Marmaxx's apparel and home categories both saw high single digit comp increases. Call. Further, it was great to see comp sales and traffic increases accelerate every month throughout the quarter. Call. Comp sales were very strong across each of Marmaxx's region.

Speaker 4

We also saw consistent performance across low, call. Marmaxx's 2nd quarter segment profit margin was 13.7%, call, up 80 basis points versus last year, primarily driven by a benefit from lower freight costs as well as expense leverage on the strong sales and call. We continue to be pleased with the momentum at Marmaxx and are excited about the initiatives we have planned call to help us drive sales and traffic for the remainder of the year and beyond. At HomeGoods, we were very pleased to see 2nd quarter call. Comp store sales increased 4% and a significant increase in customer traffic.

Speaker 4

HomeGoods comp sales and traffic call. Increases also accelerated every month throughout the quarter. I also want to note that our full year plans assume that HomeGoods will continue call to comp positively for the second half of the year. HomeGoods' 2nd quarter segment profit margin was 8.7%, call, up 600 basis points and entirely due to benefit a benefit from lower freight costs. We remain confident in the long term call.

Speaker 4

At Canada, comp store sales were up 1% and customer traffic increased. Segment call. The margin was 15.7 percent. As the only major brick and mortar off price retailer in Canada, we have a very loyal shopper base and many value conscious shoppers. We are confident that we are set up well to continue growing our footprint across call and attract more customers to our banners.

Speaker 4

At TJX International, call. Comp store sales increased 3% and customer traffic was also up. It was great to see comp sales and traffic increases call at both our European and Australian businesses. During the quarter, we also launched online shopping in Germany and Austria. Call.

Speaker 4

Segment profit margin for TJX International on a constant currency basis was 2.1%, call, which was negatively impacted by over 300 basis points due to the reserve related to the German receivable I spoke to earlier. Call. We are very happy with our overall performance in this division and are confident we can continue to grow our banners in our existing countries call and improve profitability. As to e commerce, overall, it remains a very small percentage of our call. We continue to add new merchandise to our sites so that shoppers can see something new every time they visit.

Speaker 4

Call. Moving to inventory, balance sheet inventory was down 7% versus the Q2 of fiscal 2023. Similar to the Q1, the year over year decline was primarily due to the elevated levels we saw last year from the early arrival of merchandise call and a larger in transit balance as a result of supply chain delays at that time. We feel great about inventory levels call. Thank you, Eric.

Speaker 4

Thank you, Eric. Thank you, Eric. Thank you, Eric. Thank you, Eric. Thank you, Eric.

Speaker 4

Thank you, Eric. Thank you, Eric. Thank you, Eric. Thank you, Eric. Good morning, Eric.

Speaker 4

Good morning, everyone. Good morning, Eric. Good morning, everyone. Good morning, everyone. Good morning, everyone.

Speaker 4

Call position to flow fresh assortments to our stores and online this fall and holiday season. I'll finish with our call. For the Q2, we generated $1,300,000,000 in operating cash flow call and ended the quarter with $4,600,000,000 in cash. In the second quarter, we paid down $500,000,000 of maturing debt and returned $932,000,000 to shareholders through our buyback and dividend programs. Now I'll turn it back to Ernie.

Speaker 1

Call. Thanks, John. I'll start by highlighting the key strengths that have allowed TJX to grow successfully call to many kinds of retail and economic cycles for nearly 5 decades. I am convinced that these core strengths set us apart call from many other retailers and will continue to be a tremendous advantage going forward. First is our value leadership.

Speaker 1

Call. Our goal has always been to offer great value on every item every day to every customer. At TJX, value is more than just offering call. We believe our value proposition is one of the best in all of retail and will continue to attract consumers to our retail banners all around the world. 2nd, call.

Speaker 1

We have developed one of the most flexible brick and mortar retail models in the world. The flexibility of our close to need call. Optimistic buying allows our merchants to quickly react to the hottest trends in the marketplace and adapt to changing consumer preferences. Call. The flexibility of our supply chain and store formats allows us to ship to our stores multiple times call.

Speaker 1

We are pleased to announce that our customers are in a position to deliver strong growth in our stores. 3rd, call. We successfully operate stores across a wide customer demographic. We want to sell to everyone and We aim to appeal to all value conscious shoppers and inspire and excite them every time they visit us. Call.

Speaker 1

The flexibility of our business allows us to curate an assortment of good, better and best merchandise call across our stores and to appeal to shoppers across all income demographic areas. Call. Next, we have built an expansive vendor universe over many decades and believe we have some of the best call. This vast network of changing vendors, which numbered approximately 21,000 over the last year, call is the reason why we are so confident that there will always be more than enough inventory in the marketplace for us to buy. Call.

Speaker 1

Our best in class buying organization of 1200 plus merchants does a terrific job Selecting the right mix of categories and brands for the right stores to create our fun treasure hunt shopping experience. Call. We also see the globalness of our business as a tremendous strength. We have built a highly integrated global infrastructure, supply chain call and buying organization that we believe would be difficult to replicate. This allows us to leverage our global presence call to create a differentiated treasure hunt shopping experience in each country we operate in.

Speaker 1

Call. Last but certainly not least is our talent. Teaching and talent development have always been priorities at TJX. Call. Throughout our organization and management teams, we have deep decades long off price experience in the U.

Speaker 1

S. And internationally. Call. I believe that our global talent base will continue to be a tremendous advantage as we continue our growth around the world. Call.

Speaker 1

I truly believe that the combination of these key strengths and the execution of them call is why we are one of the strongest companies in all of retail and have a very long history of successful performance. Call. Now, I'll briefly highlight the opportunities we see to keep driving sales and traffic in the second half of the year. Call. 1st, as I said earlier, we are seeing phenomenal product availability across all categories and a wide range of brands.

Speaker 1

Call. This gives us great confidence that we can bring consumers the right assortment at the right values throughout the fall and holiday season. Call. 2nd, we feel great about our store merchandising initiatives that we have planned. We are particularly excited about our gifting initiatives call.

Speaker 1

As we continue to focus on being a destination for gifts throughout the year, with our rapidly changing assortment, we believe shoppers will be call. And 3rd, we have very strong marketing campaigns planned. Call. Each of our brands will continue to reinforce our value leadership position through a combination of channels including digital, television and social media. Call.

Speaker 1

We believe our compelling campaigns will capture the attention of new consumers while keeping us top of mind with our existing customers. Call. Moving to profitability. We are extremely pleased that the high end call. Our adjusted pre tax profit margin plan for fiscal 2024 now exceeds our previously announced target call of 10.6 percent for fiscal 2025.

Speaker 1

This is a testament to the hard work call. And commitment of the entire organization, I want to assure you that we did not be that we will not be call. And we'll strive to continue improving our profitability over the long term. Before I close, call. I'd also like to reinforce our deep commitment to acting as a responsible corporate citizen, and I am proud of the work our call.

Speaker 1

We expect to publish our annual Global Corporate Responsibility Report this fall, call, and I hope you'll take some time to look at our website to learn more about what we are doing. Call. Summing up, we are very pleased with the momentum we are seeing across the business and the very strong start to the 3rd quarter. Call. We've had excellent performance in the first half of the year and our teams have put us in a great position for continued success for the remainder of the year.

Speaker 1

Call. I'm convinced that the characteristics of our flexible off price business model and the operating expertise within our organization call. I am so proud of our culture, which I believe is a major differentiator and a key component of our success. Call. I am extremely confident about the future of TJX and I'm excited about the opportunities we see to capture additional market share call and improve profitability in the long term.

Speaker 1

Now, I'll turn the call back to John to cover our full year and Q3 guidance, call, and then we'll open it up for questions.

Speaker 4

Thanks again, Ernie. Before I start, I want to remind you that fiscal 'twenty four calendar call. Also, as we stated in our press release this morning, we have offered eligible former TJX associates call, who have not yet commenced their pension benefit an opportunity to receive a lump sum payout of their vested pension benefit. Call. We anticipate that the impact of this pension payout offer, primarily a non cash settlement charge, call could negatively impact fiscal 2024 EPS by approximately 0.01 to 0.02p but could be higher or lower call depending on participation rates and other factors.

Speaker 4

To be clear, any of the guidance we are providing today does not include the call. We expect to exclude the impact of this call. Potential settlement charge from our adjusted pretax profit margin and EPS results in the Q3. Now to our full year guidance. Call.

Speaker 4

We are now planning an overall comp store sales increase of 3% to 4%. As a reminder, our comp call. Our guidance excludes our expected sales from the 53rd week. For the full year, we now expect consolidated sales to be in the range of 50 call. $3,500,000,000 to $53,800,000,000 This guidance includes approximately $800,000,000 call.

Speaker 4

Additional revenue expected from the 53rd week. As Ernie said, we're increasing our full year profitability guidance. Call. We're now planning full year pre tax profit margin to be in the range of 10.7% to 10.8%. Call.

Speaker 4

Excluding an expected benefit of approximately 10 basis points from the 53rd week, we now expect adjusted pretax call. We expect gross profit margin to be in the range of 10.6% to 10.7%. On a 52 week basis, this would call, represent an increase of 90 to 100 basis points versus fiscal 2023's adjusted pretax profit margin of 9.7%. Call. Regarding shrink, we continue to be laser focused on our in store initiatives, while making sure we maintain an enjoyable shopping experience call for our customers.

Speaker 4

At this time, our shrink indicators are leading us to believe that we can continue to plan call. As a reminder, we will not know the full effect of our shrink initiatives

Speaker 1

call or

Speaker 4

the accuracy of our indicators until we do a full annual inventory count at the end of the year. Call. Moving on, we're planning full year adjusted gross margin on a 52 week basis in the range of 29.4 to 29.5%, a 180 basis point to 190 basis point increase versus last year. We expect virtually all of this increase to be driven by a benefit from lower freight costs, we are also planning a benefit from merchandise margin. Call.

Speaker 4

This guidance also assumes a continuation of headwinds from our supply chain investments in incremental distribution center wages. Call. We are very pleased with the level of freight recapture we are seeing given the significant pressure we saw over the prior 3 years. Call. Our expected freight benefit this year includes a pull forward of most of the benefit we were expecting in fiscal 2025.

Speaker 4

Call. We remain laser focused in looking at ways to reduce our freight costs. Call. Moving on, we're expecting full year SG and A on a 52 week basis to be approximately 19.1%, call, a 120 basis point increase versus last year. This expected increase is primarily driven by incremental store wage call and payroll costs and higher incentive accruals.

Speaker 4

For modeling purposes, we're currently assuming a full year tax rate of 26%, call. Net interest income on a 52 week basis of about $157,000,000 and a weighted average call. As a result of these assumptions, we're increasing our full year earnings per share guidance call to a range of $3.66 to 3 point 7 call. From the 53rd week, we expect adjusted earnings per share to be in the range of $3.56 to $3.62 call. On a 52 week basis, this would represent an increase of 10% to excuse me, 14% to 16% versus fiscal call.

Speaker 4

23's adjusted earnings per share of $3.11 Lastly, we now expect call to open about 125 net new stores in fiscal 2024, an increase of approximately 3%. Call. This reflects a shift of some of our planned fall openings into next year. Moving to

Speaker 1

the 3rd quarter, call.

Speaker 4

We're planning overall comp store sales growth to be up 3% to 4%. Similar to the 2nd quarter, we expect the comp call. Less than it was in the 2nd quarter, again due to merchandise mix. We're also expecting an increase in units sold. Call.

Speaker 4

We expect 3rd quarter consolidated sales to be in the range of $12,900,000,000 to $13,100,000,000 call, a 6% to 7% increase over the prior year. We're planning 3rd quarter pretax profit margin to be in the range of 11.3% to 11 call. We're expecting 3rd quarter gross margin in the range of 30.3% to 30.5%, call up 120 to 140 basis points versus last year. We're planning a significant benefit from lower freight costs, call, partially offset by headwinds from supply chain investments, inventory cap and our year over year shrink accrual. We're planning call.

Speaker 4

3rd quarter SG and A of approximately 19.3%, up 130 basis points versus last year. Call. This expected increase is driven by incremental store wage and payroll costs and higher incentive accruals. For modeling purposes, call. We're currently assuming a 3rd quarter tax rate of 25.3 percent, net interest income of about $40,000,000 and a weighted average call.

Speaker 4

We expect 3rd quarter earnings per share to be in the range of 0.95 up to $0.98 up 10% to 14% versus last year's adjusted $0.86 call. For the Q4, on a 13 week basis, we're planning comp store sales to be up 3% to 4%, call. Adjusted pre tax margin in the range of 10.3% to 10.5% and adjusted earnings per share call in the range of $1 to $1.03 We will provide more detailed guidance for the Q4 on our Q3 earnings call. Call. Before I close, I want to echo Ernie's comments that we continue to see opportunities to further improve profitability over the long term.

Speaker 4

Call. As always, the best way for us to drive profitability is with outsized sales. We continue to see opportunities to grow sales and traffic call and capture additional market share. Further, we remain laser focused on being even better on buying and retailing the goods call and driving merchandise margin. At the same time, we expect to continue to face headwinds from incremental wage costs and supply chain investments.

Speaker 4

Call. As usual, we'll give you a detailed annual guidance beyond this year on our call in February. Call. In closing, I want to reiterate that we are very pleased with the execution of our teams across the company and are confident call in our sales and profitability plans. Further, we have a strong balance sheet and are in an excellent financial position call to simultaneously invest in the growth of our business and return significant cash to our shareholders.

Speaker 4

Now we are happy to take your questions. Conference call. As we do every quarter, we're going to ask that you please limit your questions to 1 per person so we can keep the call on schedule and answer as many questions as we can. Call. Thanks.

Speaker 4

And now we'll open it up for questions.

Operator

Thank you. We will now begin the question and answer Call. Our first question will come from Matthew Boss. Your line is open. Call.

Speaker 5

Great. Good morning and congrats on a really nice quarter.

Speaker 1

Thanks Matt. Thank you.

Speaker 5

So Ernie, you cited the 3rd quarter off to call. Could you just elaborate on how traffic and demand progressed over the Could you just elaborate on the improved bottom line full year outlook as we think about AUR and freight relative to shrink and wages?

Speaker 1

Call. Sure. Yes, Matt, good question. Obviously, looking at as the indicator I gave when I said very strong for the Q3 start, which is call. Coming out of Q2 where each month got a little stronger.

Speaker 1

So we were sequentially Stronger throughout Q2 as the quarter went on and that momentum has now continued call. And I think you were asking about any differentiator between apparel or home, I would tell you, well, call. When you have comps like this and you have Marmaxx running such a high comp as they did, as you can imagine, call. We are experiencing health across just about every category in the store. And in fact, apparel across The Board has been very healthy, as has the home area.

Speaker 1

And I'm talking within Marmaxx, because you've seen that HomeGoods call. Remember, Q1 in HomeGoods, we were down 7% and now we were up 4% in HomeGoods for Q2, which is call. Really a terrific we had signaled to all of you that we thought there would be incremental improvement. Clearly, it was even exceeded our expectations

Speaker 4

and we are feeling

Speaker 1

very good about that business. Call. And we are feeling very good about that business also as we go into Q3. So I hope that answered your question.

Speaker 4

Call. And Matt, just to answer the question you had for me, I mean, as far as call. The back half and full year guidance, we continue to see freight opportunity in our initiatives, obviously increasing our call. The confidence we have to increase our top line sales gives us the confidence to increase our back half guidance. As far as AUR, look, call.

Speaker 4

As far as pricing and merchandise margin, they were in line with our expectations. And the buying environment is fantastic, call. As Ernie said, we continue to see opportunities to take price in certain areas and merchandise margin improvement. Call. We're really pleased at how our strategies this quarter drove our top line and again gave us the confidence to increase our full year comp.

Speaker 1

Call. Yes, that's great. John was touching on it. You did in your question. As we talked remember there was a little bit confusion last call and we talked call.

Speaker 1

About how our ticket might be down slightly and pretty much it was on our expectations. Right in line. Right in line. And as a result, we call. Our top line, as we had explained in some of our meetings about call.

Speaker 1

You can't judge the average ticket and its sales relationship because some of the categories that we were growing in the mix of departments create multiple purchases. Call. And so, we're pleased to see it all really went along the lines of what we had discussed call back at the end of Q1.

Speaker 5

It's great color. Congrats again on the momentum.

Speaker 4

Thank you. Thanks, Matt.

Operator

Call. Thank you. Our next question comes from Lorraine Hutchinson. You may proceed.

Speaker 6

Call. Thank you. Good morning. I just wanted to confirm what I think you just said, which was the like for like price increases are working call. And the ticket decline was just mix.

Speaker 6

And then my question is, if you think you're seeing any signs of a trade down customer coming into any of your banners?

Speaker 1

Lorraine, so we got it. So yes, the like for like call. Pricing continues to work. We continue to see opportunity there as we move forward. Call.

Speaker 1

And again, we do that as we said from the very beginning, we do that very selectively in certain areas and certain categories and certain items. Call as witnessed by our performance, as well as we have another data point which we measure call. Qualitatively, where we measure customer perception of our values. First of all, we can tell from our turns as well as our sales. Call.

Speaker 1

But we have another perception point, where consumers right now are actually seeing our value perception versus call. Our next question comes from the line of John call. Which tells you it's working. And then a second thing, ironically, is against the category average, we have improved. Call.

Speaker 1

So those are good barometers. We can see it in the metrics, though, Lorraine, when you look at our turns and our sales. Call. And where, again, as we've also said, is where we have ever found an item where it didn't work, we adjust and then we bring that item back call. Rodney McMullen:] To where we think if it needs to work, but our hit rate has been 90 plus percent.

Speaker 1

So call. The second part of your question again, Lorraine, was on the

Speaker 6

Any signs of a trade down consumer?

Speaker 1

Trade down, which call. Hard for us to measure trade down. What I think we would say is store closures as well as call. I would say, because in some cases it's not a trade down or it's a trade over based on the category. Call.

Speaker 1

So, hard for us to measure trade down. What we can feel is capturing market share from other retailers that call. Closed or downsized in some of their store counts. And I am sure we are getting increased market share because we can see it in some of the categories that we call. Carrie.

Speaker 4

Yes, I mean there's been a lot of volatility in the retail environment for a while and we think we've got strong execution. We call. We feel that we continue to gain that market share.

Speaker 7

Thank you.

Speaker 8

Thank you.

Operator

Call. Next, we will hear from Brooke Roche. Your line is open.

Speaker 2

Thank you and thank you. Good afternoon. Thank you for taking our question. With greater visibility to your previous long term 10.6% FY 2025 margin target, can you help call. How are you thinking about the rate and pace of that potential improvement call beyond some of these freight recapture opportunities that you've seen this year?

Speaker 2

Thank you.

Speaker 4

Yes, Brooke, we're not giving guidance call. Long term right now, but I can say that as always, we strive to improve all the time, whether it's call. Better buying or expense control, we continue to strive to do better.

Speaker 2

Call. Great. Thank you so much.

Speaker 1

Brook, I would just also jump in. What John said earlier in his notes call. Call. We do believe because we've tried to make our store environment sticky for the customer in terms of call. He or she really having a great experience there as well as the merchandise.

Speaker 1

These are the 2 primary components call. Well, what captures new customers and gets customers back. So we believe momentum doesn't just turn off overnight. Call. So I think part of what we're all feeling internally here is as we've captured new and increased additional visits amidst call.

Speaker 1

The market share gain we're getting that that will be also a margin driver for us as we move forward.

Speaker 4

Call.

Speaker 2

Thank you.

Speaker 1

Thank you.

Operator

Our next question will come from Mark Altschwager. Your line is open.

Speaker 9

Call. Great. Good morning. Thanks for taking my question. So maybe just first for John, with respect to the margin call.

Speaker 9

If we look at the high end of the guide for Q3 and Q4, it does seem to imply a nice acceleration in Q4. Now I know you You've got the benefit from the extra week, you're cycling the shrink accrual. So those are some big factors. But I guess beyond that, maybe what are some of the other factors that we should be call.

Speaker 4

Yes. So, as you saw, we did increase the comp. We feel confident about continuing to drive that top line. Call. The other thing that is benefiting us, so in the second quarter and third quarter, we comment on the shrink.

Speaker 4

Call. So we have just in line with how we accrue, there is an unfavorable impact call. In the second and third 1st, 2nd and third quarter and then we have a favorable impact in the 4th quarter. That along with we call. We continue to work on our freight initiatives and continue to try to control those costs as much as we can.

Speaker 9

Call. Thank you. And maybe a follow-up for Ernie. This is the Q1 in a while where both Marmaxx and HomeGoods are contributing to the positive comps. I know there's some noise call.

Speaker 9

So with comparisons in HomeGoods in the back half, but just bigger picture, how should we be thinking about the contribution from HomeGoods versus Marmaxx and a normalized comp algorithm moving forward? Thank you.

Speaker 1

Yes. So, Mark, obviously, we won't give the exact call. We're thinking further out. However, we do feel we are really hitting pretty much an inflection point call. In the HomeGoods business and we're pretty bullish on the back half here that Home will continue to improve call.

Speaker 1

On the trend versus the trend that you just saw, we're feeling good about the opportunity to continue to improve in our home mix. And call. To your point, we'll continue to contribute to the TJX comp with a combination of call. With HomeGoods and Marmaxx. Also just again, we tend to talk about HomeGoods specifically, but our home business within our full family stores, so that's whether in Europe or in Canada and then clearly in call.

Speaker 1

T. J. Maxx and Marshalls, our home business there has also and those business has also improved, also good indicator because we used to talk call a few years ago about the fact that home when you roll it all up is a key component of the TJX business. So again another reason why call. John and I have talked about as we move forward that home will continue to be a traffic and conference

Speaker 9

call. Our

Speaker 1

call. Thank you.

Operator

Our next question will come from Marni Shapiro. Your line is open.

Speaker 10

Hey, guys. Congratulations on a great quarter. If you could just talk a little bit, traffic remains your biggest driver and your marketing has been conference call. Very, very strong. Can you talk a little bit about has it changed the frequency of how often the shoppers coming to your stores?

Speaker 10

Call. And are you seeing an increase in your shopper shopping across your different boxes? I know you continue to call. Co locate, but I'm curious if you're seeing that shopper really move from one concept to the next more than usual.

Speaker 4

Call. Yes, it's hard for us to read that in detail. Just generally looking at the transaction Increases that we have, we believe that we are attracting more new customers to our brands. Call. And when you look at how we're attracting those customers, they tend to be more younger customers, the more Gen Z customers that we're attracting, Which we're really excited about, because that speaks to the longevity that we see.

Speaker 4

So

Speaker 1

call. Yes, Marty, the thing I can tell you, even though we can't get some of that info, the ones that are cross shopping do spend more. Yes. So it is the goal of ours to go after that. As John said, we have been attracting a disproportionate number of new Gen Z and millennial shoppers, call.

Speaker 1

Which is what we really look at in terms of future growth because that's the future higher spend. Call. So when we look out on our strategies for 5 to 7 years that it and by the way we purposely go after that, we do compare, call. What we do get at, we can compare our shoppers against some of the competition. There is some general data on that that we look at.

Speaker 1

And we've been feeling really good about all gender and age groups to our stores and all the customers that are skewing younger, and that includes in Europe, call. Australia, domestically. Yes.

Speaker 10

And then just a quick follow-up, though I do call. John must be watching Alabama Rush on TikTok because you guys are all over it and they all shop there, those Gen Zers. But could you just clarify the call. 53rd week revenue number? I think you said it pretty quickly.

Speaker 10

I want to make sure I got it down right.

Speaker 4

Yes. So the 53rd week call. It's worth 10 basis points to our pretax profit and $0.10 to our earnings per share, call. And it's about $800,000,000 on the top line.

Speaker 10

Great. Thanks so much, guys.

Speaker 4

Thank

Operator

call. Our next question will come from Alex Stratton. Your line is open.

Speaker 11

Call. Great. Thanks for taking the question. Congrats on another great quarter Ernie and John. I think just starting with the guidance call.

Speaker 11

From a like zooming out here, it looks like you're improving the full year by more than what you guys just beat by. So it seems like you're more call. I'm optimistic on the back half than maybe you were when we spoke a few months ago. So can you just talk about what the key drivers are there to that increased optimism? Call.

Speaker 4

We beat Q2 by 10 pennies and we're beating call. We're increasing the back half by 0.04 pennies and that's on increasing the comp from a 2 to 3 to a 3 to 4 call. Given the strength we see in our sales, and then as far as our freight initiatives, we feel call. The opportunities that we took in Q2, we're assuming that we continue in call. The back half of the year, and again, we're pulling forward a lot of what we would have expected in FY 'twenty five, call.

Speaker 4

We're really happy to be gaining that benefit this year.

Speaker 11

Call. Thanks a lot.

Speaker 1

Thank you.

Operator

Our next question comes from Bob Drbul.

Speaker 4

Call. Just a couple of questions. On apparel and accessories, in terms of what you're seeing and sort of call. The consumer is responding to, is there a big change in sort of the good, better, best mix that is Helping you throughout this quarter and the rest of the year?

Speaker 1

Great question, Bob. Not really a big change. Call. Again, there has been an amazing what did I use in the script? Phenomenal.

Speaker 1

Phenomenal availability across call. Really all the areas. I would tell you there are pockets, sometimes in categories where we don't get good, better, best as call. Proportional as we'd like, but that's our business. So we always know that we're not going to be exact because we're opportunistic in our buying.

Speaker 1

Call. Our buyers are great in terms of strategically and knowing that they want their mix to be a certain balance depending On the category, by the way. So, for example, our buyer in handbags doesn't necessarily want the same ratio of good, better, best call. Determined by brands etcetera, the buyer and women's tops, okay. So that varies, but we have been pretty healthy, I would say, call.

Speaker 1

Other than in certain pockets of certain areas and accessories, it's been a little bit more of an up and down and an imbalance. Call. So we always look at that as opportunity for the following year because when we have those pockets as you can see we just ran a 6 comp and we still have those pockets of call. Opportunity where we don't have the mix balanced exactly the way we want it to be, and even in some apparel areas, call. We ran into that in the 2nd quarter that they weren't as strong as they could be if the mix was more balanced and good, better, best the way that we want it call.

Speaker 1

So it's funny your question brings we could spend a couple hours on it because we and the merchants we love to talk about call. How we go about doing that and we also know that certain quarters we look better than other quarters. But as You can see in the total picture, we look really strong and the merchants have done across a vast array and you could never find a call. .:] quarter where there isn't one area that doesn't have a little imbalance. For the most part, really strong balance of good, better, best.

Speaker 1

Nothing has really changed strategically on that front and just a great question you asked. And by the way, I'll

Speaker 4

just add to what Ernie said. Call. Our ability to offer good, better and best, I mean, really differentiates us from our competition and we feel is a real competitive advantage.

Speaker 1

Call. That's a great point. I didn't get to get into that as much on the script and I know sometimes in our call. Different investor meetings. We get to talk more about it.

Speaker 1

But it is, I think, one of the most key strategic advantages we have, A, the fact call. Around us very few do that. They're not they're zeroing in on certain demographic segments or certain which could include age or fashion call. And we don't do that and I think that will continue to be a benefit to us over the next 5 to 10 years, huge.

Speaker 4

Call. Thank you.

Speaker 1

Thank you.

Operator

Next, we will hear from Dana Telsey. You may proceed.

Speaker 7

Call. Hi. Good morning, everyone, and congratulations on the terrific results. Call. As you think about the real estate profile of the store, have you been a beneficiary of any of the Bed Bath and Beyond locations?

Speaker 7

Call. And is there at all a difference in performance of the stores suburban or urban? And then lastly, with the improving trend in HomeGoods, call. How much of that or is anything you can glean from the elimination or the departure of Bed Bath and Beyond call that's also an additive and a share enhancement for your home results? Thank

Speaker 4

call. As far as the real estate opportunity, we've been on this call. From the beginning of when retailers start to close stores and we take the best locations that fit our profile call. And we'll continue to do that as we see stores close. As far as the sales and what we've seen, call.

Speaker 4

Particularly for Marmaxx, we saw very consistent sales performance across call. Especially in some of these markets that are more rural as the call. You see more and more closures as the department store of those areas and see opportunity. Call. So as far as the Bed Bath and Beyond gaining market share, call.

Speaker 4

They've been losing market share for quite a while and we think we've gained it along the way. So it's sometimes a little bit hard call. We feel that our execution in home has been outstanding and we've been able to call. Take that market share as it comes up.

Speaker 1

Yes. So Dana, we think, to John's point, top to measure, call. But we feel as though, yes, we are getting from a Bed Bath and Beyond or but not just those guys. Call. Even some of the I believe we're getting some business from the online home retailers as call.

Speaker 1

Well, that have been a little inconsistent in their execution. I think that just creates other opportunities. Call. And then everyone, that's at the store end for demand we're talking. The other great not great, the other good thing call.

Speaker 1

As it creates additional supply of buying opportunities, we've been talking today about at the retail level customers call. We need another place to shop. But for our merchants, they get to take advantage of additional supplies and we mean even more now to call. Certain vendors because now they have less places for them to sell their goods. So that's been equally, call.

Speaker 1

I guess beneficial.

Speaker 7

Thank you. Congratulations.

Speaker 1

Thank you. Thanks.

Operator

Call. Our next question comes from Cory Tarlow. Your line is open.

Speaker 8

Call. Hi, good morning and thanks for taking my question. I had a follow-up on the AUR commentary or ticket. I know that it moderated a little bit call. This quarter, is the expectation in the guide that it should moderate throughout the rest of the year or perhaps inflect positively as we call.

Speaker 8

And then just as a follow-up on wages, how are you thinking about wages, John, in the outlook throughout the remainder of this year?

Speaker 4

Call. You want me to take? So I'll start with actually wages.

Speaker 1

Yes, I'll start with wages.

Speaker 4

Yes. Wages, we continue to see that as a headwind call. And our wages, we're going to be competitive in our wages in every market that we're in. Call. And when we look at our attrition rates, our attrition rates are call.

Speaker 4

In line or improving with where they were last year. So we feel really good at where our wage is right now and our ability to call. Attract associates to our company.

Speaker 1

On the ticket, Corey, call. So, yes, in Q2, we actually, didn't moderate. It kind of came in pretty much where we expected. Call. It's as we move to the back half, the ticket we think is going to moderate, which is to be down a little less call than we were in Q2.

Speaker 1

However, I always like to qualify this that we do not and again I've talked this way for years, we do not call. Top down drive our average ticket. So the average ticket which is really ultimately voted on by the customers call. Who determine which categories we need to drive hard in the store by supply and demand. We can tell by the way they're call.

Speaker 1

And by the way the market looks so that we'll go after them. It's driven by down at the buyer and merchandise manager level, which is where we call. Really generate. We don't dictate to those teams, which categories to have more or less of. That's really driven by Consumer demand, which then drives our ticket sometimes because of the mix of departments.

Speaker 1

So right now, call. We look like we're moderating based on the on order, but if certain opportunities or certain categories get hotter, call. That could be lower or higher ticket. That could move a little on us. Obviously, Q3, we can project a little better than Q4.

Speaker 1

Call. So, it's always a bit of a touchy one where we don't want to over commit how firm we are on where the AUR is heading call. Because it's so bottom up by customer demand and buyer driven. Does that make sense?

Speaker 8

Yes. That's very helpful. Thank you very much. Call.

Speaker 1

Yes. But we right now, it looks like it is moderating for certainly Q3.

Speaker 4

And what we mean by moderating is mean down Down less. Call. And you can see the impact to our top line on the strategy that we've had. I mean, we're offering call. What they want and they're coming back.

Speaker 4

Yes.

Speaker 8

Great. Thank you so much. Thank you.

Operator

Call. And our final question of the day comes from Adrienne Yih. Your line is open.

Speaker 2

Call. Great.

Speaker 6

Thank you very much. And it's great to see the acceleration in all divisions actually. Call. You're welcome. Obviously, my question is probably going to be inventory.

Speaker 6

So I actually want to ask not so much about the composition of it, but call. The buying strategy, off price buys, little bit upfront, you've got great visibility on the open to buy forward looking, And then you do a lot of buying sort of intra season. And so just can you contextualize sort of how that is so different from last call and the advantageous position that it's putting you in as you head into holiday? Thank you very much.

Speaker 1

Sure, Adrienne. Call. I like the way you framed it all up. So we do not obviously we won't give the percentages by those types of call. Buying patterns the way we buy by each one.

Speaker 1

However, we do buy all those different ways. Right now, we are call. Our mission as always is to pace ourselves on the buying of the in season closeouts because the market is so loaded. So as we move call. Right now, what we're thinking, Adrianne, is we will pull back even a little bit more on any of the buys that we tend to buy earlier or up conference call.

Speaker 1

Saunders:] Because all indicators are there will be a continued additional supply at least over the next 6 to 12 months call of what you were just referring to as the in season closeout type of situation. Call. The packaways is kind of varied. That has become a smaller percent of our business only because call. In many cases, the fashion there, if it isn't right, we don't tend to pack it away.

Speaker 1

But the pattern call. What we're seeing right now would tell us we're going to be even a little bit and now I'm talking massaging these by just a couple of points. We don't conference call. Do pendulum swings on our open to buyer, how much we do upfront versus leave for closeouts. Again, the closeouts and the opportunistic side of our business, that's The bulk of our business and that's what we prioritize.

Speaker 1

And we see that, I would think kicking up a notch over the next call. I hope that answers your question.

Speaker 6

That definitely did. Thank you very much and fantastic momentum.

Speaker 4

Call. Call.

Operator

Thank you. That was our final question of the day.

Speaker 1

Okay. Thank you. I would like to thank call. Thank you everybody for joining us today. We look forward to updating you all again on our Q3 earnings call in November.

Speaker 1

Take care everybody.

Operator

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

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Earnings Conference Call
J.B. Hunt Transport Services Q2 2024
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