Carol Meyrowitz - Chief Executive Officer and Director Sherry Lang - Senior Vice President of Global Communications Ernie Herrman - President Jeffrey Naylor - Chief Administrative Officer, Chief Financial Officer, Chief Accounting Officer and Senior Executive Vice President

Daniel Hofkin - William Blair & Company L.L.C. Stacy Pak - Barclays Capital Jeff Black - Citigroup Inc Richard Jaffe - Stifel, Nicolaus & Co., Inc. Paul Lejuez - Nomura Securities Co. Ltd. Mark Montagna - Avondale Partners, LLC Adrianne Shapira - Goldman Sachs Group Inc. Brian Tunick - JP Morgan Chase & Co Howard Tubin - RBC Capital Markets, LLC Jennifer Davis - Lazard Capital Markets LLC Patrick McKeever - MKM Partners LLC Marni Shapiro - The Retail Tracker Roxanne Meyer - UBS Investment Bank Kimberly Greenberger - Morgan Stanley Evren Kopelman - Wells Fargo Securities, LLC Laura Champine - Cowen and Company, LLC

Ladies and gentlemen, thank you for standing by. Welcome to the TJX Companies First Quarter 2011 (sic) [2012] Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, Tuesday, May 17, 2011. I would like to turn the conference call over to Ms. Carol Meyrowitz, Chief Executive Officer of the TJX Companies, Inc. Please go ahead, ma'am.

Thank you. Good morning, everyone. And before I begin, Sherry has a few words.

Good morning. The forward-looking statements we make today about the company's results and plans are subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially. These risks are discussed in the company's SEC filings, including, without limitation, the Form 10-K filed March 30, 2011. Further, these comments and the Q&A that follows are copyrighted today by the TJX Companies. Any recording, retransmission, reproduction or other use of the same for profit or otherwise without prior consent of TJX is prohibited and a violation of the United States copyright and other laws. Additionally, while we have approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in that transcript. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Also, we have detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and the Investor Information section of our website, www.tjx.com. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release and posted on our website, www.tjx.com, in the Investor Information section. In addition, that section of our website also includes reconciliations of guidance with respect to non-GAAP measures to guidance on a GAAP basis. Thank you. And now, I'll turn it back to Carol.

Good morning, again. And joining me is Sherry, who's on the call; and Ernie Herrman; and Jeff Naylor. Let me begin by saying that our overall first quarter performance demonstrates, once again, our ability to deliver consistent results year-over-year in economic upturns and downturns. Despite extraordinary growth in the prior year, we continue to deliver positive comps and earnings per share in line with our plan and on top of a 9% comp increase and a 63% increase in EPS last year. We believe that our first quarter sales would have been even stronger if it were not for the unseasonable weather that hindered apparel sales in many U.S. and Canadian regions. When we spoke with you on our last conference call, we said that we expected the first quarter to be the toughest of the year as we faced our most challenging prior year comparison, particularly for our European business, as well as timing issues related to certain expense items. With our most challenging quarterly comparison behind us and May off to a very strong start, we are looking forward to the second quarter and the rest of 2011. Going forward, we have many exciting opportunities, and we remain as convinced as ever that we will continue to drive steady top and bottom line growth regardless of the economic environment. But before I continue, let me turn the call over to Jeff to recap our first quarter results.

Thanks, Carol. Good morning, everyone. Again, I want to emphasize that we will be referring to adjusted results throughout today's presentation. Reconciliations between our GAAP reported numbers and the adjusted results are provided in today's release, and we've also put them up on our website. Now to recap first quarter fiscal 2012 results. First off, net sales reached $5.2 billion. That's a 4% increase over last year. Our consolidated comp store sales increased 2% on top of a very strong 9% increase last year. That was driven by continued growth in customer traffic. And for the quarter, the ticket was essentially flat. Adjusted diluted earnings per share were $0.78 compared with last year's $0.80 per share. Now these results include a $0.03 negative impact from foreign currency exchange rates due to a mark-to-market adjustment on our inventory-related hedges, which had not been contemplated in our original guidance. So our underlying results are a bit stronger than it would appear and, excluding the mark-to-market adjustment, towards the high end of our guidance. This item is expected to effectively reverse in subsequent periods, primarily in the second quarter when the inventory that we’ve hedged is sold. Turning to pretax profit margins. Our pretax profit margin on an adjusted basis for the quarter was 9.6%. That's in line with our original guidance and down 110 basis points from the prior year. Now the mark-to-market adjustment represented 30 basis points of this decline, with the remaining 80 basis points primarily due to factors that were anticipated in our plan, and I'll cover in a moment. It's important to note that we expect these factors will moderate as we move through the year. And in the guidance I'll cover later in the call, we continue to plan for full year, that's full year adjusted pretax profit margins, essentially flat on a 1% to 2% comp sales increase. So what we're seeing here in the first quarter largely reflects a pacing or a timing item. The gross profit margin decreased 40 basis points on an adjusted basis versus last year. 30 basis points of that is due to the mark-to-market adjustment. The remaining 10 basis point decrease was primarily due to lower gross profit margins in Europe, as we took significant markdowns to clear out inventories, and that was partially offset by improved buying and occupancy expense leverage. SG&A expense increased 70 basis points, which was in line with our expectations, and reflected the factors impacting Q1 that we discussed on our last conference call. So in terms of the factors themselves, specifically, the increase in SG&A reflects the timing of certain expense items. One, we're absorbing talent and certain costs from the A.J. Wright division and other TJX divisions. Secondly, we have deleverage from our European segment. And finally, for most of the first quarter, we did not have the benefit of sales from the 90 A.J. Wright conversion stores, which negatively impacted our expense ratios. So again, these factors will moderate as we move through the year, and we continue to expect SG&A rates for the full year, that's a full year, to be up minimally on the planned 1% to 2% comp increase, which is about what you'd expected. So again, Q1 SG&A rates, we think, are more about the timing and the pacing of the year. Turning to inventories. At the end of the first quarter, consolidated inventories on a per store basis, including the warehouses, were up 12%. That's up 10% on a constant-currency basis, and that compares to a 12% decrease last year. This increase was primarily due to our having taken advantage of much larger available quantities of end-of-season branded packaway product, and that compares to very low quantities that we had of end-of-season packaway last year. It's important to note that inventory levels in our stores are down and turning faster, which bodes well for merchandise margins. Further, we entered the second quarter with a more liquid inventory position, with more open to buy than at this time last year, and we think we're in very, very good shape to buy into current trends and opportunities in the market. In terms of shareholder distributions, we retired 7.1 million shares, buying back $361 million of TJX stock during the quarter. We continue to anticipate buying back approximately $1.2 billion worth of TJX stock this year. We also raised the annual dividend to $0.76 per share, a 27% increase, and it's worth noting that this was the 15th consecutive year in which we’ve raised our dividend. So now I'll turn it back to Carol, and I'll come back later to provide details on our guidance for the balance of the year.

Thanks, Jeff. As we've reiterated many times, our consistent performance over both the short and long term, as well as the strength and sustainability of our business, give us great confidence in the future. I intend to keep my comments brief today, leaving more time for Q&A. I'll start by highlighting the major themes in regard to the sustainability of our strong sales and margin and our exciting opportunities for the second quarter and beyond, beginning with sustainability. The first quarter clearly speaks to the power of our off-price business model to deliver steady performance year-over-year. To recap our divisional results. In the U.S., we are very pleased with Marmaxx and HomeGoods, excellent first quarter performance. Both of these divisions achieved strong comps on top of very challenging prior year comparisons. On the bottom line, adjusted segment profit grew significantly across both businesses, and adjusted segment profit margin continued to improve over prior year level. At Marmaxx, comp sales increased 4% over last year's very strong 10%. Adjusted segment profit was 14.4%, up 10 basis points on top of last year's record performance, and customer traffic continued to be up over significant increases last year, despite the negative impact of unseasonable weather in the Northeast and Midwest. This bodes well for our business when the weather turns warm in these regions. At HomeGoods, comp increased 6% over last year's exceptional 15% increase. Adjusted segment profit was up 80 basis points versus last year, then highest ever first quarter profit performance for this division. HomeGoods' sharp execution is driving these strong results as we are offering customers great off-priced values on a fantastic assortment of goods from around the world. TJX Canada's first quarter results were heavily impacted by weather. We believe that the negative impact of un-spring-like weather on demand for apparel drove the sales mix, while deleverage on the 3% comp decline hurt the bottom line. It's important to note that our home businesses in Canada performed well, which we believe underscored the impact of weather. We are excited about our launch of Marshalls in Canada, where our first 5 stores are now open. Although still very early, customer response has been very strong. Moving to TJX Europe. As I mentioned on our year-end call, we don't expect to see improvement in this business until the end of the second quarter as we're still focusing on getting this business back on track. We've talked about how our rapid pace of growth last year put pressure on our organization and we lost our value proposition with a mix that was too moderate. As we knew we'd have to, we took aggressive markdowns in the first quarter in order to clear out and start a new fresh season. We have begun to see inventories turning a bit faster in the last several weeks than they were a year ago, and that's a good sign. Further, I believe both our brands and values are definitely getting stronger, continue to expect that we will start to see progress by the end of the first half, with greater improvement in the second half when TJX Europe typically earns the majority of its profit. In the short term, we believe that we are making some progress and beginning to head in the right direction. And in the long term, we're confident that Europe continues to represent a significant growth opportunity for the company. As we move into the second quarter, we have many exciting opportunities. First, customer traffic continued to be up in the first quarter over significant increases last year. Looking over the last 2-year period, customer traffic has increased enormously, up in the mid-teens percentage range. This indicates to us that value remains top-of-mind for consumers. Second, while we have made significant gains in our U.S. market share and widened our demographic reach substantially, enormous opportunities still remain. Our research tells us that approximately 75% of U.S. shoppers have not shopped at T.J. Maxx or a Marshalls store in the last year, which translates to tens of millions of untapped shoppers in the U.S. log [ph]. Third, we believe that our more effective marketing is helping to grow our customer base. Our television network campaigns were very successful in the first quarter, and our increases in customer traffic tell us our messages are working. We will be making a bit more of an investment in our marketing this year. Fourth, our store remodels are helping to retain the new customers we are attracting with our marketing. At Marmaxx, we will have almost 2/3 of our stores in the new prototype by the end of the year. We continue to see sales lift when we remodel store comparable to when we began the program. The returns are not diminishing. We are on track to remodel approximately 350 stores across all our businesses this year. Fifth, on a macro level, we see the uncertainty in the marketplace of outsourcing and pricing as an opportunity for our business. Historically, disruption in the marketplace has created great off-price opportunity. We can utilize our flexibility to seize opportunity and react faster to the market trends than just about any other retailer. The key for us is relative value. If other retailers pass on costs to consumers and our pricing umbrella rises, this should allow us to drive merchandise margins while maintaining our value gap. If other retailers absorb rising costs, we typically have the flexibility to adjust our mix, which enables us to remain under the pricing umbrella while sustaining merchandise margins. We are seeing tremendous opportunities for great brands and quality products in the marketplace. We enter the second quarter with very liquid inventory, which puts us in an excellent position to respond quickly to the current fashion and trend. We continue to open more vendor doors around the world as we expand our universe of more than 14,000 vendors. So you can see that we have many reasons to be excited about our opportunities as we begin the second quarter, and we will be utilizing our flexibility in the marketplace to its full advantage. Before closing, I want to cover a couple of other key points that give us confidence in our business. We continue to invest and make improvement in our supply chain to run the business with even leaner, faster turning inventory. This has led to even fresher selections and sequential improvement in merchandise margin. We continue to see additional opportunities to reduce our inventory, as well as fine-tune our shipping of the right goods to the right stores at the right time. This is a major factor in our confidence in sustaining our top and bottom line strength. Further, we remain sharply focused on managing expenses with cost-cutting initiatives underway across the company. To recap our plans, we expect to reduce costs by approximately $50 million to $75 million in 2011, which will help protect our profit margin and offset other cost increases. Although very early, I am pleased with the performance of our stores that have been converted from A.J. Wright. If this continues, it bodes extremely well for the possibilities of additional stores under both the Marmaxx and HomeGoods banners long term. As we learn more and more about these customers, we see several tactical improvements that we -- that can be made to make these stores even stronger. In terms of our outlook for the second quarter. While our comparisons become easier than the first quarter, we will continue to plan conservatively. At the same time, as always, we are motivated to surpass our goal. Jeff will provide details on guidance in a moment. Summing up, we have many reasons giving us confidence for the second quarter and beyond. We delivered strong sales in the first quarter despite exceptional prior year growth. Earnings were in line with expectations, and our comparisons get easier as we move through the year. We had sales momentum exiting the quarter and May is off to a good start. We expect the benefits from converting our former A.J. Wright stores into more profitable TJX banners to ramp up as we move through the year and beyond. We are looking for TJX Europe to begin to make progress towards the end of the first half with greater improvement in the second half. Due to the uncertainty in the marketplace around costs and sourcing, it's an opportunity for our business as disruption in the market typically creates great off-price buying opportunity. We continue to invest in and improve our supply chain to run with even leaner in-store inventories, which drives faster inventory turns and merchandise margins. We have a strong consistent history of generating enormous amounts of cash, resulting in some of the highest financial returns in the retail industry, and we have a long track record of returning cash to our shareholders through our share buyback and dividend program. We have vast growth potential with the portfolio of 4 powerful divisions are -- and we are investing in our infrastructure to support profitable growth in the short and long term. Now I'll turn the call back to Jeff to go through guidance, and then we'll be happy to take all your questions.

Thanks. So before I get to guidance, I want to briefly touch on 2 items related to the quarter. One, first, let me speak to the Canadian performance. As we discussed upfront, our consolidated EPS in Q1 was reduced by $0.03 due to the mark-to-market adjustment. Virtually all of this adjustment was recorded in our Canadian segment. So while segment profit and profit margin in Canada were down, the mark-to-market adjustment was a very big factor. Just to dimensional-ize that for you is that -- while we reported an $18 million decline in segment profit at Canada and a 370 basis point decrease in the segment profit margin, the numbers are actually $9 million down and 170 basis points, if you exclude this item, and that's on a negative 3% comp, which was -- basically be in line with what we would expect. The second item. I want to briefly recap the A.J. Wright consolidation, given that we're essentially down at this point. Through the end of the quarter, all of the 162 A.J. Wright stores have been closed, and 79 of the 90 stores that we're converting to Marmaxx and HomeGoods banners have been reopened. So of those remaining 11 conversions, 9 have already been completed in May, to date, with just 2 more to go. The costs to close A.J. Wright and convert the 90 stores to other banners are significantly below where we thought they would be. First, to close the A.J. Wright business, we estimated the after-tax cost would be in the $150 million to $170 million range or $0.38 to $0.43 per share. And of that, $40 million to $50 million was cash -- was cash. Our current estimate is that the after-tax cost will be in the $120 million range or $0.30 per share, with an after-tax cash cost of approximately $20 million, which is well below that $40 million to $50 million original estimate. In terms of the cost of converting the 90 stores to Marmaxx and HomeGoods banners, which represents the costs that we incurred during the go-dark period, as well as the grand reopening costs for these stores, the impact on EPS is expected to be approximately $0.03. And that's at the low end of our original estimates. And then finally, in terms of the benefit. We remain confident that the converted stores, will, on a run rate basis, generate $25 million to $35 million of after-tax profit, which is in line with our original estimate. Approximately $15 million to $20 million, or $0.04 to $0.05 per share of this, is incremental to what we were earning with A.J. Wright. We expect that approximately $0.03 per share of this benefit will be realized in the remainder of the current fiscal year, with the balance picked up next year. That said, the most important benefit of the A.J. Wright decision remains the improved profitability that we expect from opening stores that were previously designated for A.J. Wright and opening those as Marmaxx stores and the enhanced growth that'll bring the company. So that's just a quick recap of A.J. and the consolidation, where we've come out. Now onto guidance. As you can see from today's release, we provided fiscal 2012 guidance on both a GAAP basis and an adjusted basis, and the adjusted basis excludes the impact of the A.J. Wright closing and the related store conversions, as well as the impact of a non-operating item in fiscal 2011. Details of our adjusted guidance, along with the related reconciliations to GAAP financial information, can be found in the table in the Investor section of our website, and I'd encourage you to refer to these. I'm going to speak to the adjusted numbers in my remarks today. So for the full year, we now expect adjusted earnings per share in the range of $3.81 to $3.93, which represents a 9% to 13% increase over the adjusted $3.49 in fiscal 2011. I should note that the high end of this range is consistent with our original guidance, while we've raised the low end by $0.03 to reflect Q1 performance. Now the full year guidance continues to be based on a 1% to 2% comp store sales increase. We continue to project adjusted pretax profit margins in the 10.4% to 10.7% range, which is down 20 basis points to up 10 basis points over the adjusted fiscal 2011 pretax profit margin of 10.6%. And that's a little better than what we'd expect, given the 1% to 2% comp increase that we have in the model. For the second quarter, we expect earnings per share to be in the range of $0.81 to $0.86, which is an 11% to 18% increase over our adjusted earnings per share of $0.73 last year. So in terms of the underlying assumptions, what are they? We're assuming second quarter sales of approximately $5.4 billion to $5.5 billion, with a comp sales increase of 1% to 3% on both a consolidated basis and up 2% to 4% at The Marmaxx Group. As to monthly comps. For the month of May, we're planning comps to increase 2% to 3% on a consolidated basis and increase 3% to 5% at The Marmaxx Group. And obviously, that's the month of May. May is our most difficult comparison of the quarter. In June, we expect comps to be flat to up 2% on both a consolidated basis and at Marmaxx. In July, we expect comps to increase 1% to 3% for both TJX and Marmaxx. For the quarter, the pretax profit margin is planned in the range of 9.5% to 9.9%, which is down 10 to up 30 basis points versus the adjusted 9.6% last year. We are planning our second quarter gross profit margin in the range of 26.7% to 27.1%. That's up 10 to 15 basis points over the prior year. And we expect SG&A as a percentage of sales to be in the range of 17.0% to 17.1%. That's an increase of 20 to 30 basis points over the 16.8% recorded in the second quarter of fiscal 2011. This guidance reflects the moderation of the factors, which impacted Q1 SG&A rates, as cost ratios will benefit from a full quarter of sales from virtually all the A.J. Wright conversion stores. We'll be further along in absorbing A.J. Wright talent and certain other costs into our other businesses, and we will face easing comparisons at our European business. For modeling purposes, we're planning a tax rate of 38.1%, net interest expense in the $9 million to $10 million range and weighted average shares of approximately 389 million. Our full year and second quarter guidance both assume that currency exchange rates will remain unchanged from current levels. Finally, a few comments on the back half of fiscal 2012 that's implied by today's guidance. We believe the back half will be relatively stronger as we will benefit from easing year-over-year comparisons, the cycling of negative trends in Europe, the profit impact of the A.J. Wright conversion stores and the moderation of the SG&A factors that were discussed earlier. So we're expecting EPS in the back half of $2.22 to $2.30, up 13% to 17% over the adjusted $1.97 in the prior year, and that excludes last year's fourth quarter charges related to A.J. Wright. I should note that this guidance is based on comp store sales growth in the 1% to 2% range. And for the back half, we believe pretax profit margins will be up 20 to 40 basis points over last year's adjusted 11%. We'll now open up the call for questions. [Operator Instructions]

[Operator Instructions] And our first question today is from Jennifer Davis. [Lazard Capital Markets] Jennifer Davis - Lazard Capital Markets LLC: It must feel great to have comps positive against your strong comps against the second half of last year and the first quarter of this year.

Absolutely. Jennifer Davis - Lazard Capital Markets LLC: So my question is, if you look at your Marmaxx segment margins, you keep exceeding record levels. Did you think if you kind of annualize it, a 13% to 13.5% is the right level? And will the converted A.J. Wright stores impact those margins? Are those lower margin stores or will they be similar to the chain average?

Well, in terms of the A.J. Wright stores, their profit percent is slightly higher and their dollars are slightly lower. But we are planning Marmaxx pretty conservative as we always do. And the likelihood, I always feel good that we usually beat our number. So I'm hoping to beat those numbers in the second quarter in the back half.

Jennifer, for the full year, we've -- we're calling for the Marmaxx segment profit margin, which was 13.3% last year, to be basically flat on a 2% to 3% comps. So as Carol mentioned, the stores that -- the Marmaxx stores we have in the lower-income demographics, we actually see slightly higher four-wall contributions from those stores. So it doesn't hurt, that cannibalization can be a factor, but when you put it all together, it's basically flat year-over-year. And that's what we have baked into our 3-year model, by the way, when we look out 3 years it’s a flat segment profit margin for Marmaxx on a 1.5% to 2% comp. Jennifer Davis - Lazard Capital Markets LLC: All right, great. I'll limit it to one. I do have more though. So if you have time, I'll circle back.

Just get back in the queue.

Our next question is from Evren Kopelman. [Wells Fargo Securities]. Evren Kopelman - Wells Fargo Securities, LLC: I had a question on the -- your comment on the larger available quantities of the end-of-season branded packaway. Are you buying more, more because of the cost increases that are coming in the second half or more because the product is good? Because it's surprising that there'd be so much excess good product out there because we've seen, in general, strong retail sales over the past few months and quarters. So is this specific brands that have been underperforming or is it just because, like I said, you're just ramping up ahead of the cost increases?

First of all, our packaways, we only do packaways when we see wonderful deals. This isn't about mitigating costs, it's really about the product itself. And second of all, across the board, we're pretty excited about the amount of products. So it's really across the board.

Yes. And a big piece of this, Evren, it's not just what we bought this year, it's also that the quantities of packaway that were available last year were very...

Minimal.

Very minimal. So a piece of this is more opportunity this year, particularly at the end of the season. There are a lot of cancellations -- there are a lot of late arrivals of goods in the fourth quarter. We were able to take advantage of that as we crossed over into this year, but that was up against very low levels of packaway last year. So that's part of what's impacting the year-over-year comparisons.

And I would just jump in and say also the merchants have been selective through that process. So it's not like we just buy every packaway, but the availability was so plentiful. We stayed selective as we went through that whole list of packaways.

Our next question is from Brian Tunick. [JPMorgan Chase]. Brian Tunick - JP Morgan Chase & Co: I guess two quick ones. I guess, Jeff, I was surprised on your comment regarding the flattish Marmaxx margins over the next few years. It seems like, as you guys have talked about inventory turns, it seems like HomeGoods has been the number one focus, and that Marmaxx is still in the early innings. So why should Marmaxx margins be flattish? Aren't there still some decent markdown opportunities ahead for the Marmaxx division? And on T.K. Europe, what kind of margin expansion are you guys assuming in the back half? And is that more on the sales leverage returning or is that on the markdowns?

All right. Brian, we'll go through all the Europe numbers, because I think it'll be very beneficial for everyone to understand how conservatively we are planning it and what the opportunities are. Again, we plan conservatively, and we will continue to do that in terms of Marmaxx and HomeGoods. And I like to end each quarter and each year being on the positive and beating our plan. So do we believe there's opportunity? Absolutely. Do we think it's prudent to just plan conservatively? Absolutely. And that's what we do and will continue to do. So yes, we do believe there is opportunity. You want to go through Europe?

Yes. And, Brian, that's just -- obviously, that's what we're putting in. We've got a 3-year model that gets us to 10% to 13% EPS growth. Baked into that is a 1% to 2% comp. So we think that the conservative way to plan it is to -- flat profit margin on a 1% to 2% comp. It takes some SG&A cost reduction to get there. And there's probably gross -- but we think there's more gross margin opportunity than, to Carol's point, than there is risk, but I think that's the prudent way to plan it. So my comment is related more to the model. But I tell you the management view, obviously, we're striving to beat it. In terms of the assumptions for Europe, I'll give you the Q2 and the second half. So as you look at the comp, right now, we're calling for a 0% to 2% comp in the second quarter, and that's on top of a minus 4% last year and a 6% the year before that, plus 6%. In the second half, we're calling for a 2% to 4% comp. That's on a minus 4% last year and a 3% the year before that. So if you start -- and you guys can do this math off-line. But if you actually start looking at the 2- and the 3-year stacked comps for the second quarter of this year and the second half of this year, we do not have a significant -- we have a slight improvement in trend, but not a dramatic improvement in trend. I'd say, it's nothing that's -- that I would characterize as heroic. And we think those are makeable numbers. In terms of the profit, the thing to realize is that in the back half of the year -- last year, we came up against -- we had almost a 400 basis point hit on the gross margin line in the back half at Europe. Q1 this year was down pretty significantly, as well as, Carol mentioned, we took a lot of markdowns. But we were up against basically a flat margin last year. So what's happening here is we're going to -- as we move from Q1 into Q2 and into the second half, the margin comparisons get significantly easier. The comp comparisons get easier. And so we think as we look at the plan, that we planned it, what I would refer to as, prudently. And we've also planned it candidly below what our internal expectations would be for the business. But we think that's right way to do it, given some of the trends that we've seen over the last 9 months.

And just a couple of comments on Europe. We've done quite a bit here, and we've really strengthened the team. We have a high-level team now and veterans, and we're feeling pretty good about the group. We became very liquid. We're absolutely focused on the right brands and the right values. We have this -- have had this in the past in our businesses, and we've certainly fixed them. We are more country-centric, and we've slowed the growth. And next year, we'll have a minimal number of stores. And we'll play it by ear, and we can react very quickly. We're certainly starting to see some positive signs. And Ernie was just over there, and I think he's feeling pretty positive. And what about the goods you've seen over there and the market?

Yes, I was just there recently. I'm feeling better about the fashion as well as the brands that we have in the mix. So I think that's equally important in Europe. I think we're headed in the right direction, in terms of the overall values that we're delivering to the stores and to the customers. I think what's helping there is that the market in Europe has been yielding some very exciting opportunities. And our merchants have been able to, as Carol said, we're liquid, so they've been able to take advantage of these opportunities. And at the same time, they have really been focused on buying the best of the best. So I think throughout that process, I think the mix in the stores from a fashion and brand perspective is feeling a lot better than it did a few months ago. So again directionally, without being too optimistic, I want to stay balanced here, I would say the goods in the stores are feeling better.

And as we've said, we're still planning it, within the total, very conservatively. Hopefully, there's upside.

Our next question is from Adrianne Shapira. [Goldman Sachs] Adrianne Shapira - Goldman Sachs Group Inc.: I actually have one clarification and then a question, if that works. Just, Jeff, if you could -- on the guidance for Q2, I just want to be clear. Does that include -- the $0.81 to $0.86, does that include the $0.03 benefit related to the inventory?

It does. So it would have a flip on the mark-to-market, Adrianne. That's worth, we think, somewhere around 30 basis points as well to the bottom line. Adrianne Shapira - Goldman Sachs Group Inc.: Okay, great. And then, Carol, just as we're focusing obviously on Europe and Canada as opportunities in the back half. I guess, on Europe, the markdowns that you had to clear the goods, are we clean as we enter Q2 in Europe? And then on Canada, it sounds as if your commentary about May off to a good start, should we also read that the weather has gotten more accommodating in Canada and you've seen better trends in Canada as well?

Well, first of all, the -- Canada, we're -- we had a 10 point differential in terms of home product to apparel. So we are starting to see apparel get a little bit stronger in Canada. So I think that's going to bode well. And Canada is not an issue for us. We really believe that it was a weather issue. So I think going forward, we feel pretty confident in that. Adrianne Shapira - Goldman Sachs Group Inc.: In Europe, are we clean?

Yes. In Europe, we are clean. And as I said before, for the first time, we are starting to see turns faster than last year. We absolutely cleaned out first quarter.

Our next question is from Stacy Pak. [Barclays Capital] Stacy Pak - Barclays Capital: So I guess just a follow-up on Europe, and then I'm hoping to get your opinion, Carol, on direct and what that means for T.J. But just on Europe, can you explain to us why you're confident that this -- your execution issue, and maybe if you're seeing differences in experienced buyers to less experienced, if that's the issue? Or you're seeing differences in countries? And tell us if you started TV and what you're seeing there. And then on direct, Carol, what does direct mean to TJX? Do you think you're going to start selling over the web? What do you think about the private sale opportunity? What kind of product could you sell? I'm just kind of wondering if you are going to start doing that.

So how many questions is that? Stacy Pak - Barclays Capital: It’s really 2. It's a follow-up -- more clarification on Europe and then address direct. But I was just giving you...

Let me get back to Europe, first. We really put the A players who are focused and mentoring. We are focused on the right vendors, on the right values. The guys know what turns the goods and what sells. We have a plentiful market. More importantly, Ernie has worked with the group, and they are very, very liquid and very, very focused. We're country-centric now, more so than we were a year ago. So all of the moves that had to be made have been made, and that's where our confidence level comes. Again, having said that, we don't want to overpromise. So that's where we are with Europe. In terms of e-commerce, we are using some of our bench. We have developed a team. We've done a lot of research in this arena. We look at e-commerce in the future in combination of a great marketing tool and tremendous leveraging of our stores. So the idea of having brick and mortar and e-commerce, together, is really where we see the future. So as I said before, we want to do it right. We see tremendous opportunities for us in terms of all of our brands, and we believe that we are slowly setting up a situation that will be very positive. But again, I want to come back to, we see the opportunity not just for e-commerce, in itself, but really using that to maximize our store traffic and leverage the top line of our business. Stacy Pak - Barclays Capital: Will you say when you'll begin selling online?

We haven't said that yet.

Our next question is from Kimberly Greenberger. [Morgan Stanley] Kimberly Greenberger - Morgan Stanley: My question is on inventory. I'm wondering, Jeff, if you can just help us understand the magnitude of the increase at -- in the packaway levels. In other words, was packaway 2% of inventory last year and 10% this year? And so we can just try to figure out, excluding the packaway, what the inventory levels look like. That would be really helpful. And then just a clarification. I wanted to make sure that I heard your comp guidance by month correctly. It sounds like you're expecting the best comp in May, but that's the toughest comparison. So I'm just wondering what's happening in June and July that gives you pause in your forecast.

So yes, on the packaway, it's never more than 10% of what we do, Kimberly. We were up against lower levels of -- very low levels of packaway last year. We're not specific on the quantity. I don't want to get into the mode of taking specific components of our inventory and quantifying it. But I can tell you, it's the lion's share of the increase that you're seeing year-over-year, and we feel, as Ernie said, very, very comfortable with that inventory. That it's -- it wasn't a strategy to manage margins in the back half, it was all about great values, great brands and just an abundance of available products. So in terms of the comparisons, I would tell you that May is reflective of what we're currently seeing, where I think the June, July guidance is more reflective of continued concerns about the economy, the economic environment, and frankly, being a little conservative.

Our next question is from Jeff Stein. [Soleil Securities]

Carol, question, again, back to Europe. And I'm wondering if you've taken a look at, is there anything that has changed fundamentally, either with respect to the customer or even the vendors in Europe? For example, I know for years you've talked about the fact, there was just a myriad of closeout opportunities here in the U.S., but you have those same opportunities and those same relationships with the vendors in Europe, which give you conviction that maybe something may have -- may be changing there?

Yes, it's really about our focus. And when you grow too fast and you have less experienced group and you're bringing in a lot of new buyers, the tendency is to run to fill your open to buy. And what we did do is we filled it with more moderate goods, which obviously turned off the customer. And so today, we have it very, very focused on what's acceptable and what's not acceptable. We have the pros guiding the next tier and teaching. So it just keeps coming back to focus and execution. And that's why I believe it's very fixable. There is plentiful goods out there. But we are not allowing the buyers to buy things that are not up to a certain standard and level, and they know it and they understand it today.

Jeff, and I would just jump in. Similar to what I said on the packaways is, even on the -- all the other goods that we're buying, they are being selective. And I think that's what Carol was just talking about. We are buying pretty balanced assortment now. I think we're a little too moderate prior. And so whether it's goods at the high end, goods on the middle level, the merchants are all in that page. And generally, that's what works best for us when we're buying across the board. So we're feeling much better about that.

And I think the other thing we're learning is, which vendors work in which countries. And there's a big difference between the U.K. and Germany.

Our next question is from Roxanne Meyer. [UBS] Roxanne Meyer - UBS Investment Bank: My question is on inventory turns. You've mentioned that there's still an opportunity to improve there and generate margin gains over the long term. I'm just curious at the Marmaxx division specifically, what areas of the store do you think have the best opportunity to improve turns, and to what extent are systems necessary to recognize these improvements? I know you talked about getting the right product in the right place at the right time. So, just curious how those play out.

Obviously, because we're off-price, we don't look at each specific area. We could be in a business that we're not necessarily in a year ago. But what we look at is we are investing systems -- into systems. This is going to be a short- to long-term process. And again, it's going to enable us to do some of the things that we do manually today. Systems will allow us to do it a lot quicker, a lot more efficiently. So that we're much more perfect in terms of our timing, in terms of our, what we call, the Sun Belt, the northern region, being store-centric. We've ranked each store. It will allow us to rank them more efficiently. So all of this will lead to more positive margins in the future, at least that's what we're hoping we will be able to achieve, faster turns, freshness and more excitement to the consumer.

And I think in the short term, before we're in a position to deploy those systems, there's a lot of things that we can do manually and through spreadsheets that we're doing. And I think the one thing that gives us confidence is the variation in store-level turn across our businesses is pretty wide. And that tells us that with the businesses that are turning a little bit more on the slow side, that there is an opportunity. In fact, we talked about that in the last call.

Our next question is from Daniel Hofkin. [William Blair & Company] Daniel Hofkin - William Blair & Company L.L.C.: Just a -- I guess I'll first ask about the inflation picture, and I apologize if this was discussed at the beginning. I missed the first minute or so. In terms of cost inflation and how the degree to which you're able to pass that through and what sort of impact, if any, you see on unit sales. I know you price competitively with the marketplace with the umbrella. And I guess one final clarification question on Europe, if I could, regarding the results that you've seen the last few weeks. Would you attribute that to the early signs of improved execution, or is it kind of what Ernie described in terms of just really good availability of product?

I think it's really about execution. There's no doubt that if you're picking the right product -- there's always plentiful goods, and it’s about putting your people on executing the right vendors and the right value. So that's what we're beginning to see. The market-to-market, there's always again -- we're never shy on goods, in great goods. So many opportunities there. In terms of inflation, our average ticket is fairly flat today, and our intention is to continue to give the consumer just great, great value. And if we're at certain category and prices increase out there, well, we're going to keep our distance in terms of the value. You got to realize we have so much flexibility in terms of categories, zigging and zagging in many, many different ways. So we're pretty excited about the value that we're giving our customers. So it will seek its own level. If the world is out there at higher price points, then we have the ability to raise our price points. But again, we want to keep that distance between everyone else, and that's really what our job is. Daniel Hofkin - William Blair & Company L.L.C.: Do you feel like the inflation picture is creating broader disruption that's benefiting you, broader disruption than the overall retail landscape?

Probably because anything that changes or is unknown usually tends to benefit us.

Our next question is from Richard Jaffe. [Stifel, Nicolaus] Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Just a little bit more detail, if you could, on the operating margins by division. You broke out a comment on Marmaxx that you anticipate that being flat. If you could provide some detail on the others, that'd be great.

Yes. On the full year, Richard, we're providing the guidance. So Marmaxx essentially flat on a 2% to 3%, with -- in the case of HomeGoods, we are planning that business up 20 to 40 basis points. So that would be 9.7% to 9.9%, which is a phenomenal, given where we thought the business –- [indiscernible] be. And that's on a 3% to 4% comp. In terms of Europe, we're planning that business at -- the comp is flat to 2%. And that's $100 million to $110 million on a full year basis, which is 3.4% to 3.6% at a segment profit margin. And then in Canada, we're planning that business at a 13.2% to a 13.3%. And that's on a, essentially, a flat comp, and that's against the 14.0% last year. So there's some deleverage, given that we plan the comp flat. That's said, obviously, if we can beat that comp, then there's an opportunity to maintain the margin. So that's the all-in. As I mentioned, bottom line, we're planning a 10.4% to 10.7% on a pretax against 10.6% last year, and that's on 1% to 2% comp. So we're planning it down 20 to up 10 [basis points] on a 1% to 2% for the year. So we remain comfortable with that. That's essentially the same guidance that we gave you at year end. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: And the German business continues to be a drag on the European business, as in, not yet breakeven?

Yes, I think for the year, we, right now, we would project it slightly below breakeven.

Our next question is from Mark Montagna. [Avondale Partners] Mark Montagna - Avondale Partners, LLC: Quick question, just about marketing. You mentioned increasing your marketing spend this year. Is that also going to include Europe? And are you talking about an increase in dollars or a percent to total sales? And what exactly are you looking to increase?

Mark, it’s about 10 basis points across the board. So we are getting a little bit more aggressive. Most of that is going to be Q4 driven, because we have a whole initiative going on there that we're pretty excited about. We learned a lot last year in terms of network TV. We learned a lot that we think will also help Europe, as well as Canada. So we're going to be continuing to accelerate some of those things that we tried last year that we think we have some pretty good numbers.

If the other -- just the other comment there, if I could jump in. A.J. Wright consolidation really helps in terms of marketing because, in essence, we've got 90 stores that contribute marketing dollars. And so we were able to increase the Marmaxx and the HomeGoods budgets in line with the sales that we're getting from those converted stores, which gives them more money to spend. That's all -- it's about leveraging, right. So that -- there's a benefit to advertising as well.

Our next question is Paul Lejuez. [Nomura Securities] Paul Lejuez - Nomura Securities Co. Ltd.: Just wondering if you could maybe talk about merchandise margins by division for the quarter. And also just wondering, Jeff, what was going on in the corporate overhead line?

Can we handle?

Yes, go ahead.

Yes. So merchandise margins, if you look at them by division in the quarter -- maybe I'll just break out the gross profit margins. So the G -- gross profit margin was down 40 [basis points], 30 of that was mark-to-market. So of the remaining 10 basis points decline, we did get some B&O leverage. So our overall merchandise margins were down in that 30 to 40 basis point range, Paul, and the majority of that was Europe. We actually had a little bit of an increase at HomeGoods, a little bit of a decrease, really slight decrease to flat at Marmaxx and a small decrease at Canada. So it's really -- the merchandise margin was really about Europe deleveraging almost 300 basis points. And again, our view is on the merchandise market. And our view is that, that will, as we go forward through Q2 and Q -- the back half, we start coming up against similar kind of decreases. So we think there's an opportunity, given the content and the turn we're seeing in the business and the level of a markdown that we had LY. That's a big part of what's driving the improvement in that business and in our forecast. Your second question? Paul Lejuez - Nomura Securities Co. Ltd.: Corporate overhead.

Paul, are you asking if that's lower? Paul Lejuez - Nomura Securities Co. Ltd.: No, corporate overhead was up a bunch this quarter. Just wondering what was behind that?

On margins, Paul asked -- you're asking about Q2 on the margins, right, Paul? Paul Lejuez - Nomura Securities Co. Ltd.: Correct.

Yes, okay. So yes. So I think if you look at the expenses, I think the thing to call out here is that the G&A rates were up 70 basis points in Q1. The factors that drove it were deleveraged from Europe, the expense timing, as we absorb talent and other costs from A.J. And we're basically running at full staffing right now, so we have no vacancy. Typically, at any point in time you're going to have 2%, 3% of your headcount will be open. Right now, we have no vacancy, and we've been building a bench. We used some of the A.J. talent to build the bench, which we think is smart for the future. We also didn't have the full quarter of sales from the conversion stores, which impacts our expense ratio. So that's really what's driving the G&A rate. I think the other thing is to call out, and I get to corporate expenses, but the other thing to call out is again the G&A we're seeing for the full year, up 10 basis points to up 20 on a 1% to 2%, which is in line with our model. And 10 basis points of that deleverage is coming from advertising. So we think, overall, as we look at the year, we feel very comfortable with our G&A and our G&A leverage. So what about corporate expenses? Well, obviously, you have some geography here where we have some expenses that are hitting corporate. The first is on the talent, the headcount, the bench, much of that cost is hitting corporate. Some of this is related to initiatives. Carol talked about e-com and building a team there, we have TJX University that we're aggressively using to teach people going forward, building a bench, that's all hitting corporate. We also had about $6 million of onetime items. The largest of which was a write-off that -- we moved one of our buying offices and there -- a lease write-off. It was a movement within the city, but it was still a new premise that allowed us to expand to accommodate the growth. And then finally, we have some costs in corporate that are related to our data center. We're in the process of moving our data center. We have a data center that's many years old, and we're in the process of replacing it and there's some costs. And we'll see those as we go through the year. But all this, candidly, is all baked into the guidance that we've given you on G&A for both Q2, the back half and the full year. Paul Lejuez - Nomura Securities Co. Ltd.: Got you.

And in terms of the university, we are funding both for Europe, so that we have teachers in Europe, and the United States and Canada. And this is all what we think is very positive for the future.

Our next question is from Marni Shapiro. [The Retail Tracker] Marni Shapiro - The Retail Tracker: I have one quick question. Can you give us an update on the Cube and the Runway? How they're doing here? And if there's a possibility -- it seems, just from store checks, that the merchandise there in those areas are very picked over all the time, and very shopped. So I guess is there an opportunity to expand them within -- putting it mildly. Is there an opportunity to expand them within the stores they exist? And then I was also curious if you have a similar aspect of this in Europe.

Yes, we do. We have Gold Label in Europe, which is pretty similar to the Runway, which is doing quite well. And in terms of being picked over, that's, I guess, music to my years, because it means that we're turning very quickly. Our junior business is very strong, and our Cube is working very well. It's in every Marshalls store. Do we have more upside? We probably do. And the Runway, we're careful that they are in our top, top stores. And as we do get access to more merchandise, sometimes we'll take a store out of it and shift it to another store. But we'll continue to grow that, but very slowly. But we do want to have flow. Marni Shapiro - The Retail Tracker: Right, makes sense. And then can you also give us a quick update on some of the accessories business, like handbags and personal care, which I see flex up and down depending on the time of the year and the store?

Both those areas are doing very well. Marni Shapiro - The Retail Tracker: Excellent.

Our next question is from Jeffrey Black. [Citigroup] Jeff Black - Citigroup Inc: Just two quickies. On the pricing environment outside of packaway, what are we seeing? And then what is the packaway inventory? Is it winter stuff that gets unleashed this coming winter? Is it spring '12 that gets unleashed in spring '12? Any clarity on that?

Packaway is really throughout the seasons. So some of it is planned. It'll be coming at fairly current, and some of it is for October and November. So it really varies. And that's part of the increase in the store commitments, so it's really laid out by month. In terms of pricing, the pricing environment, as I said before, our ticket remains pretty flat to very slightly up, and we're just seeing fantastic deals. So we just keep looking at it and saying we want great, great value for the consumers. So we're just taking advantage of the environment, quite frankly.

Our next question is from Howard Tubin. [RBC Capital Markets] Howard Tubin - RBC Capital Markets, LLC: Just a quick question on in-store inventories. Can you tell us roughly how much they're down versus last year, and what the opportunities to maybe reduce them further going forward?

They're closer to mid-digits down. And each year, we take a look at that. So we have some opportunities by division. And again, when I talked about the investment in terms of our systems and supply chain and that will be over probably a 2- to 3-year period of time. That hopefully, we'll be able to take advantage of that and further out, utilize the things that we do manually and, again, be able to reduce the inventory level and maximize the sales by store.

Our next question is from David Weiner. [Deutsche Bank] [Operator Instructions] We'll move on to the next question. Our next question is from Patrick McKeever. [MKM Partners] Patrick McKeever - MKM Partners LLC: What was the final split in terms of the A.J. Wright conversions between T.J. Maxx, Marshalls and HomeGoods? It looks like maybe just a handful of HomeGoods stores, and then the balance would've been kind of 1/2 and 1/2 T.J. Maxx and Marshalls. Just wondering if that was the case.

HomeGoods store?

Yes, 74 and 16.

74 and 16.

So 74 Marmaxx and 16 HomeGoods.

Yes. Patrick McKeever - MKM Partners LLC: So what was the split in within Marmaxx and T.J. versus Marshalls?

It was pretty, pretty similar.

We don't have that here, maybe a few more Marshalls but not...

A few more Marshalls but not many. It was pretty close to 50/50, might've been 60/40. Patrick McKeever - MKM Partners LLC: And then just a related question. How many vendors were you doing -- how many vendors did you stop doing business with when you -- with the shutdown of the A.J. Wright change. I mean, is that a big number?

No, it's not a big number. But we don't discuss vendors. Patrick McKeever - MKM Partners LLC: But I'm just curious with the continued growth in the number of vendors, I was just wondering if the -- it's at 14,000. I'm just wondering if the A.J. Wright vendors would've -- the unique A.J. Wright vendors would've represented a big number now that the...

I can tell you that the unique A.J. Wright vendors were taking full advantage. And some of the things that worked in A.J. Wright, we have kept it in some of our other stores. And there are areas, vendors, categories, items that have done very well, that we're taking full advantage of it in the Marmaxx chain. So again, as I said before, we're just learning a lot. And so we're just hoping that this opportunity just keeps growing and growing. We're seeing some interesting results, but it's very early, very early on. Patrick McKeever - MKM Partners LLC: Got it, got it. Okay, well, the converted stores look great to me. So it looked like real home runs.

Thank you. We're happy with them.

Our next question is from Laura Champine. [Cowen and Company] Laura Champine - Cowen and Company, LLC: Just had a question about the gross margin guidance. Implied in the back half, have you modeled for product cost increases, or is the way you buy this so different from full priced that it won't touch you?

Your second is correct.

Yes, I think -- again, much of what we buy, we buy close to the time it's in our stores. So we really have the kind of flexibility to respond to markets. And I think the evidence of that is if you go back to the fourth quarter 2008 post-Lehman, our merchandise margin was almost flat. I think we were down 10 basis points. So this shows the ability of our business to course-correct and take advantage of opportunities and respond real time to what the market's giving us and telling us. So I think we haven't priced in any margin compression.

And we are more open to buying than we were a year ago. So we actually have more liquidity.

Yes. That said, we also haven't priced in any -- if you look at the margin guidance and our guidance, we haven't -- we have assume sort of a flat to maybe very slight increase in the average ticket. So I -- we think we've been appropriately -- appropriate in our -- in the assumptions we've made about the back half.

I want to thank everyone, and we look forward to reporting on our second quarter. Thank you again.

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