Ernie Herrman - President, CEO and Director Debra McConnell - SVP, Global Communications Scott Goldenberg - SVP and CFO

Lorraine Hutchinson - BofA Merrill Lynch Matthew Boss - JPMorgan Chase & Co. Michael Binetti - UBS Lindsay Drucker Mann - Goldman Sachs Paul Lejuez - Citigroup Brian Tunick - RBC Capital Markets Omar Saad - Evercore ISI Kimberly Greenberger - Morgan Stanley Bob Drbul - Guggenheim Securities Mike Baker - Deutsche Bank Roxanne Meyer - MKM Partners Richard Jaffe - Stifel Nicolaus

Ladies and gentlemen, thank you for standing by. Welcome to the TJX Companies’ Third Quarter Fiscal 2017 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded on November, 15, 2016. I would d like to turn the conference call over to Mr. Ernie Hermann, Chief Executive Officer and President of TJX Companies, Incorporated. Please go ahead, sir.

Thank you, Taurie [ph]. Before we begin, Deb has some opening comments.

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 29, 2016. Further, these comments and the Q&A that follows are copyrighted today by The TJX Companies Inc. 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 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 in our international divisions in today’s press release and the Investor Information section of our website, tjx.com. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are posted on our website, tjx.com, in the Investor Information section. Thank you. And now I’ll turn it back over to Ernie.

Good morning. Joining me and Deb on the call is Scott Goldenberg. Let me begin by saying that I am extremely pleased that our momentum continued in the third quarter. Consolidated comp-store sales were strong 5% over a 5% increase last year and well above our plan. We are thrilled that customer traffic continued to be the primary driver of our comp again this quarter, which tells us that our merchandise mix and amazing values are resonating with consumers. We have convenience that we are gaining market share across all of our divisions. We also saw excellent performance in both our apparel and home businesses. Further merchandise margins were up significantly again this quarter, highlighting the strength of our model. Adjusted earnings per share went $0.91 also well above our expectations. Importantly, we believe that we achieve these results despite significant wage and foreign currency headwinds and while simultaneously investing to support our growth. With our strong third quarter performance we are raising our guidance for adjusted EPS growth. We are in at excellent position for the holiday selling season with many initiatives plan to drive traffic in sales throughout the quarter. As always, our management team has passionate about achieving its plans and striving to surpassed them. We are very confident and our ability to continue our successful growth and that is both in the U.S. and around the world. Before I continue, I’ll turn the call over to Scott to recap our third quarter numbers.

Thanks, Ernie, and good morning, everyone. As Ernie mentioned, our third quarter consolidated comparable store sales increased a strong 5% exceeding our plan. As a remainder, this growth excludes our ecommerce businesses. It was great to see a momentum in customer traffic continue. Once again, traffic was the primary driver of our consolidated comp increase as we offered shoppers the merchandize they wanted at excellent values. Diluted earnings per share were $0.83 versus last year's $0.86. As we detailed in today's press release, third quarter earnings per share included a debt extinguishment charge and pension settlement charge which combined reduce EPS by $.08, excluding these charges adjusted earnings per share were $0.91, a 6% increase over the same period last year and well above our plan. As expect EPS growth was negatively impacted by 3% due to wage increases. Foreign currency and transactional foreign exchange negatively impacted EPS growth by 1% versus our plan for a 3% negative impact. Consolidated pretax profit margin was 10.7%, as we detailed in today's press release the combination of the debt extinguishment and pension settlement charges reduced consolidated pretax profit margin by 100 basis points, excluding these charges adjusted pretax profit margin was 11.7% down 40 basis points versus the prior year and significantly better than we planned. Gross profit margin was 29.5%, up 50 basis points versus last year and also significantly better than we planned. This was primarily due to our strong merchandise margins increase and gains on our inventory hedges. SG&A expense as a percentage of sales was 17.6%, up 90 basis points versus last year’s ratio. This increase was primarily due to wage increases and investments to support our growth, as we had anticipated. At the end of the third quarter, consolidated inventories on a per-store basis, including inventories held in warehouses, but excluding in-transit and e-commerce inventories, were down 2% on a constant currency basis. We are very comfortable with a great liquidity in our inventory position entering the first quarter. We are in excellent position to buy and flow fresh goods to our stores throughout the holiday season. Now to recap our third quarter performance by division, Marmaxx's strong momentum continued with comps up 5% on comp of last year's 3% increase, again this quarter customer traffic was the primary driver of the comp and unit sales were up both of which or nice indication of the strength of our largest division. Average ticket was down slightly more than plan, the merchandise margins were up significantly. We continued our strategies of chasing hard categories and flexing within departments to offer the right merchandise mix in our stores. Our traffic sales and merchandise margin increases tell us our strategies are working. Segment profit margin decrease 40 basis points are very strong merchandise margin increased was more than offset by wage increases and costs associated with the lower average ticket. Marmaxx keeps delivering sales increases year-after-year, which underscores our confidence in the major growth potential that still remain at our largest division. HomeGoods delivered another excellent quarter, with comps increasing 6% over last year’s 6% growth. We were very pleased that the traffic was the primary driver of the comp increase. Segment profit margin was down 10 basis points, as expected wage increases continue to have a significant negative impact on the margin. Further, we continue to incur cost related to the opening of our new distribution center last quarter to support the long-term growth potential of a thousand customers. Our customers love HomeGoods and we couldn’t be happy with dispositions in traffic and growth prospects. At TJX Canada, comps grew an outstanding 8% this quarter, over last year’s 10% increase. Adjusted segment profit margin, excluding foreign currency was down 100 basis points. The decrease was primarily due to the merchandise margin pressure from transactional foreign exchange as well as additional supply chain costs including the opening of our new distribution center in Vancouver last quarter, the first new DC for Canada and about a decade. We continue to be very pleased with the excellent execution of our Canadian organization. TJX International’s comps were flat versus last year strong 7% increase while sales were not as strong as we would have liked. We held up better than most major European retailers in the phase of the challenging retail environment and unseasonably warm fall weather. We are convinced, we are gaining market share in Europe and are focused on keeping new customers were attracting for the long-term. Adjusted segment profit margin excluding foreign currency was down 170 basis points. The decline was primarily due to the integrating Trade Secret in Australia in our business, and some expense deleverage on the flat comp. That said, the team in Europe remained extremely disciplined and inventory management, which help mitigate some of the margin pressure. As we enter the fourth quarter, we see opportunities to approve upon last year’s performance. I’ll finish with our shareholder distributions. During the quarter, we paid out 170 million in shareholder dividends and bought back 400 million of TJX stock, retiring 5.2 million shares. For the first nine months of the year, we have paid out 482 million in shareholder dividends and retired 15.4 million shares, buying back 1.2 billion million of stock. We continue to anticipate buying back 1.5 billion to 2 billion of TJX stock this year. Now, let me turn the call back to Ernie, and I’ll recap our fourth quarter and full year fiscal 2017 guidance at the end of the call.

Thanks, Scott. I’d like to begin by highlighting our fundamental strengths, which we believe differentiate TJX from the marketplace and our key to continuing to gain market share. First, we have a world class buying organization with over 1,000 associates worldwide today. We have more than double the size of our buying team over the last 10 years. During this time we have added hundreds of new people to our buying team, and we also have many buyers who have been with us for multiple decades. We believe we are one of the widest demographics in retail and that the depth of our buying organization is helping us to attract customers of all ages. This includes millennial shoppers as we have offering fashions in brands relevant to them. Further our season buyers play a big role in teaching and training our new buyers and enhancing our off price buying methodology. I truly believe that the collective knowledge and expertise of TJX's buying organization is the best in retail. Second, we see ourselves as a global sourcing machine. Today, we source from universe of over 18,000 vendors and more than 100 countries. This is thousands more vendors and dozens more countries in a decade ago. We believe we are an increasingly attractive outlet for vendors, we operate almost 3,800 stores in nine countries, our opening new stores year after year and are selling a next to branded merchandise. We are flexible and straight forward in our dealings and offer vendors many ways to grow their business. Third, our global supply chain distribution network and IT systems have been developed and refines specifically to support our highly integrated international business and opportunistic buying. Our global distribution network can process thousands of buys from thousands of different vendors every week. Using our proprietary IP systems, our experienced planning and allocation team can precisely allocate that merchandise to the right store at the right time. Our flexibility allows us to react rapidly for changing market dynamics and consumer take to capitalize on hot product categories and the latest fashion trends. We see our global infrastructure as a major advantage of TJX. Next, we are capitalizing on our global presence. We have decades of operating experience in the U.S., Canada and Europe that we can leverage across the Company. We have successfully open in new country and retail brands by utilizing the expertise and operating knowledge across our organization. Our four major divisions are highly synergistic and share ideas, talent, initiatives and best practices. I believe that depth of our global off-price experiences unmatched and a key advantage as we continue our domestic and international growth. All of these course strings allow us to offer consumers an ever changing, eclectic mix of branded merchandize at amazing values every day. In addition, these elements of our business have taken us multiple decades to develop which is why they would be extremely difficult for any retailer to replicate. Now, let's talk about our growth initiatives which we are confident will lead to further market share gains. Our number one initiative remains driving customer traffic and comp sales. We have grown our top line year after year and are convinced that huge opportunities remain to continue growing our customer base. We are very pleased that our latest research once again shows that millennial shoppers make up the biggest percentage of our new customers in the U.S. Further, our customer satisfactions score increase that every division. Innovation continues to be a major focus to keep our storage exciting and responsive to customer takes. And we are confidently testing new ideas in each of our retail brands. Our next major growth driver is our enormous global store growth potential. Long-term we see the potential to grow to 5,600 stores with just our current change in just our current markets alone. This represents more than 1,800 additional stores on top of our current base before contemplating the potential of new change or new countries. Further we see e-commerce as a complement to our physical locations and as a way to offer consumers the ability and convenience of shopping with us 24x7. To support our growth, we are making significant investments in our business which we have discussed on prior calls. I am very confident that we are making the right investments in our global infrastructure and new seeds to build on our leadership positions to and capitalize on our first mover advantages. We believe that all of this positions us very well for the future. Now, onto our opportunities for the fourth quarter which are numerous. First, we have great gift giving initiative underway. We are offering exciting selections from around the globe and plan to shift to our stores multiple times each and every week. Shoppers can expect to see something new and surprising every time they visit a strategy that has worked well for us in recent years and I believe differentiates us from most major retailers. We are also confident that our efforts to upgrade our storage and customer service will make the shopping experience an exciting and positive one to our customers this holiday season when their time is so very valuable. Second, we feel great about our marketing campaign, which all speak to who we are as a company. We are utilizing tried branded campaigns in the U.S. and Canada again this year. Our TV commercials have just launched and will be running every week throughout the holiday season. In addition, we are leveraging components of these campaigns across radio, digital and social media. In Europe, we’ll be leveraging our holiday campaign across multiple geographies. Third, our loyalty programs in the U.S. and Canada are an important vehicle for encouraging customers to shop us more frequently and across more of our retail brands. Next, we believe we continue to get better at transitioning our stores every year and are very focused on our post holiday plans. Most importantly, we’ll be offering consumers compelling values on fantastic merchandize. The market place is loaded with quality branded merchandize across all of our geographies. We plan to take advantage of the numerous opportunities and by throughout December. In closing, I am very proud of our continued momentum of above planned the results and the sharp execution of our teams across the Company. It was great to see another quarter of such strong sales in traffic increases. The entire organization is laser focused on brining more shoppers into our stores this holiday season and throughout the year. We have a clear long-term vision for TJX and I am convinced that we will continue to drive market share gains and achieve our plans for global growth. I am proud of our ability to simultaneously invest in our growth drivers as well as infrastructure and organization to support our growth while returning cash to shareholders through our substantial share buyback program and dividends. I want to reiterate that our management team is passionate about achieving and surpassing our goals. We are very well on our way to becoming a $40 billion plus company. Now, I will turn the call over to Scott to go through our guidance. Then we’ll open it up for questions.

Thanks, Ernie. Now, the fiscal '17 guidance beginning with the fourth quarter, we expect earnings per share to be in a range of $0.96 to $0.98 versus last year's $0.99 per share. This guidance assumes an expected negative impact EPS growth of about 3% due to wage increases and approximately 6% due to foreign currency and transactional foreign exchange. We are modeling fourth quarter consolidated sales of 9.3 billion to 9.4 billion. This guidance assumes 2% negative impact revenue due to translational FX. For comp store sales, we are assuming growth in the 1% to 2% range on both a consolidated basis and at Marmaxx. This compares to a strong 6% comp increase for both TJX and Marmaxx in the fourth quarter last year. Fourth quarter pretax profit margin is planned in the 11.0% to 11.1% range versus 11.9% last year. We are anticipating fourth quarter gross profit margin to be in the range of 27.9 to 28.0 versus 28.7 last year. We are expecting SG&A as a percent of sales in a range of 16.8% to 16.9% versus 16.7% last year. For modeling purposes, we are anticipating a tax rate of 38.3% and net interest expense of about $10 million. We anticipate a weighted average share count of approximately $657 million. Moving on to full year guidance, on a GAAP basis we expect fiscal '17 earnings per share to be in the range of $3.39 to $3.41. As we noted in our press release today, we are raising our adjusted full year diluted earnings per share guidance to reflect above plan third quarter results excluding the combined impact from the third quarter debt extinguishment and pension settlement charges, we are now expect adjusted earnings per share to be in the range of $3.46 to $3.48 this would be up 4% to 5% versus $3.33 in fiscal '16. Our plan assumes a negative impact EPS growth of about 3% due to wage increases and approximately 3% due to foreign current and transactional foreign exchange. As a remainder, we expect that wage increases will have the similar negative impact of approximately 3% to fiscal '18 EPS growth. On a consolidated basis we are expecting a comp increase of 4% in fiscal '17. For the year, we expect pretax profit margin to be approximately 11.2% excluding the negative impact from the third quarter debt extinguishment and pension settlement charges of approximately 20 basis points. We expect adjust pretax profit margins to be in the range of 11.3% to 11.4% range versus 11.8% last year. We are looking for gross profit margin to be approximately 28.9% versus 28.8% last year. We expect SG&A as a percentage of sales to be about 17.4% versus 16.8% last year. For modeling purposes, we are anticipating a tax rate of 38.4% and net interest expense of about $44 million. We anticipate a weighted average share count of approximately $664 million. Now to our full year guidance by division. At Marmaxx, we are now planning comp growth of 4% on sales of $21.1 billion. Additionally, we expect segment profit margin to be about 14%. For the fourth quarter, we are assuming Marmaxx’s average ticket to be down versus last year. At HomeGoods, we now expect comps to increase 5% to 6% on sales of $4.4 billion. We now expect segment profit margin to be in the range of 13.4% to 13.5%. At TJX Canada, we are now planning a comp increase of 8% to 9% on sales of $3.2 billion. We now expect adjusted segment profit margin, excluding foreign currency to be in the range of 13.6% to 13.7%. At TJX International, we are expecting comp growth of about 2% on sales of $4.4 billion and adjusted segment profit margin excluding foreign currency to be about 5.8%. It’s important to remember that our guidance for the remainder of the year assumes that currency exchange rates will remain unchanged from the levels at the beginning of the fourth quarter. Now, we are happy to take your questions. To keep the call on schedule, we are going to ask that you please limit your questions to one per person. Thanks, and now we will open it up for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Lorraine Hutchinson. Your line is now open.

Thank you, good morning. I wanted to follow up on the commentary around Marmaxx’s average ticket being down slightly more than planned? Was that due to mix or you continuing to see pressure from some of the department stores or other competitors on pricing? And then what’s the outlook, I know you said ticket down versus last year. Do you think that gets worse in the fourth quarter or do you think you can hold this current level?

So, I’ll just start and Ernie will chime in. First on average ticket, as we said earlier it’s -- the majority of it in the third quarter has to do with chasing categories. So, it was more mix related based on consumer preferences that we were just -- that we’re working on and we are following their taste. I’d also like to just point out that we are buying better and passing some of those values onto the customers as our merchandise margin approved the both based on certainly markdown improvement based on the strong sales, but also an improvement in our mark-on so.

Yes, Lorraine, also I think another thing I guess it speaks to mix a little bit -- is we had some seasonal -- the weather was fairly warm and we consciously went into third quarter knowing we’re going to push back some of the seasonal categories, which tend to the higher ticket as well. So, as Scott said, we went after the touch for any category, but we also affected the ticket by consciously pushing off things like outwear a little bit later and heavy on its sweaters that tend to be higher ticket. So hopefully that makes sense and hopes answer that question. I think we’ll continue to moderate as best we think. The only unknown is the market is loaded with goods and that piece that Scott referred to as the second piece could still be applicable as the environment stage rather difficult. We want to continue to take advantage of those opportunities. So tough to say, we still have plenty of open to buy as we look out into the spring first quarter, but hopefully that answered it.

Yes, the only other thing to add is that on our last call, we didn’t make a call on the average ticket. So, we have now average retail down in Marmaxx in the fourth quarter, so that’s a change from our prior guidance. So, we provided for some of those cost in the fourth quarter.

Thank you. Our next question is from Matthew Boss. Your line is now open.

Thanks. On the gross margins, can you just breakdown the 50 basis point expansion this quarter between the merchandise margin improvement in the FX gain? And then just the headwinds embedded in the fourth quarter guide, any commentary there? And then finally on FX as we think to next year, if rates held exactly where they are at today, how do we think about the headwinds from FX next year versus the 3% bottom line that you outlined this year?

Well, I’ll try to get all three questions there Matt. The first in terms of the gross margin being up 50 basis points, so the majority of that was due to strong merchandise margin led by Marmaxx. We also had hedge benefit, so we would have been up more than the 50 with the combination of those two. But they are offset as we had cost related supply chain cost including our DC investments that offset actually some of the buying and occupancy leverage we had with our rent tax in camp. So a strong merchandise margin and some gain on the hedges offset by the supply chain cost. In terms of -- I’ll go the third question on next year, too early to make a call on the FX. We will certainly talk about it next quarter, but as we talked about last quarter with the continuing drop of the pound, there clearly could be some pressure for FX next year primarily with the British pound impact on our Europe business.

And then fourth quarter headwinds?

The fourth quarter headwinds a significant part of that in the gross -- I assume you're calling at the gross margin is the two things, one is the reversal of the gain we had on the hedge which make up little less than half of our 70 basis point drop in gross profit margin of fourth quarter and then the continued supply chain cost, but also some deleveraged on the two comp at the high end that we have that’s in the buying and occupancy line. So those would be the three major headwinds in the fourth quarter to the gross margin.

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

Can I just continue on our last question, what level of comp do you think would help you mitigate that deleverage you talked about on some of the supply chain cost on the fourth quarter?

Yes, typically it's a strong three that you need to leverage your buying and occupancy cost.

Okay. Thanks. And then we have seen the department store is all coming and sort of lowering their inventories and you guys are saying AURs have been lower and part of it is mix? But so the -- it's seems like the gap should be widening for your pricing umbrella relative to the department store, is that historically can be as room to that guys move up more? Or do you look at that in sale, it looks an opportunity for us we always preferred to gather share? How do you look at kind of some of the high level changes we are seeing across the industry right now as far as your outlook for AUR?

So, Michael, you’re hitting on the two grade points. First of all, we look at it as market share opportunities. We’re very reluctant to raise prices unless we see them raised. So we don’t lead that process, we let those retailers as you’re talking about even though that the lean inventories. They still have unfortunately rights in many cases decreasing sales based. So they are not necessarily going to raise that we haven’t seen any way. And we let that process happen more bottom up from our buyers and merchandise managers that are always looking at what the other retailers are retailing actually. So, I tell you yes represent two opportunities, we do a little bit above, we might be able to go up and we tell as we see it happening, we just don’t call that about our level, we really let that. Just like when by the way when you have average tickets were going down, that was driven by strategy from the buyer and merchandising manager level. This happens surgically, very surgically by item, by vendor down at the department level, when we surgically take them up at that time. So, hopefully that answers your question. It’s really too -- you're hitting on both appropriately both aspects.

And can I just ask you, you referenced the comments you made last quarter about looking ahead to your fiscal 18 to next year a little bit and some of the headwinds for us to be thinking about as we do some longer range modeling? Would you mind truing us up, another quarter has gone by at this point, FX has moved a little bit. Minimum wages, you guys have done a good job of offsetting a lot of the wages. You also mentioned some investments to leave a little bit of flexibility. I think it all rounded out to 500 to 600 basis points of headwind in the model for next year, similar to this year. Is that still the right range to be thinking about? Any kind of updates to the way you've been thinking about that over the last three months? Thanks.

This is Scott. I think nothing, no new store report in terms of whether it’s wages investments or as I talked earlier in terms of answering the question Matt asked on FX. So, we’ll be giving long-term -- we’ll be giving guidance and updating it on the next call as in that really no news store report. All, Michael, as we will plan to get into more debt FY18.

Our next question is from Lindsay Drucker Mann. Your line is now open.

Hi. Good morning, guys. I was wondering if you could add any color on performance by region or by store type.

The only thing that we talked about in terms of region and in terms of our largest division Marmaxx, the sales were strong across all of our regions in the U.S. I’m not sure, if you’re asking about the divisions or you’re asking about Marmaxx, but sales were strong across all divisions and we are pleased that both parallel sales we’re getting strong for the year third quarter in a row at Marmaxx as well.

Okay. Great. And just a follow-on. Inventory per store, excluding currency down, versus your comp, and has slowed or has been slowing for a few successive quarters. I was hoping maybe you could give a little more color as to what's going on, if there's any shift in your approach to buying and any sort of change in the availability of goods out there for you to buy? Thanks.

Lindsay, when you’re saying slower, you mean, you seen the inventory levels coming down.

Yes, exactly.

Overtime here recently, so there is a -- how would I put it -- there is always a lot of goods, but as you saw or heard in the script and we talked about that last time as well. The market is ramped up a little bit in terms of more loaded market place across more categories than we have seen in the past. So as much as you will read that we tell you timed up an inventory, we are not running into that situation in terms of market availability in terms of what's in the wholesale market. So that presents an opportunity for us to where possible run with linear inventories to take advantage closer in on the buying. So hopefully you understand, we are going to try to buy I guess simplifying it more hand to mouth closer in than we were a year ago because of the availability.

And that’s a primary driver of your change in inventories being down now?

It's a piece, yes, while we have an iteration sometimes when you look at this year versus last year, you can -- when you're off-price and opportunistic, you can have gyrations that hit point in time that aren't pure as that. But we did feel like at this time period, it would be nice to have more liquidity based on what's going on in the market. So it was -- I would say I don’t know half of that was a strategy.

Yes, I mean we just to echo on what Ernie, we ended the second quarter with our inventories on a constant currency flat, and we delivered a flat comp. And I think going back over many periods whether our inventories have been low or slightly higher than that it's really has an impacted our ability to procure the inventory and fit whatever sales are out there for us to get. Having said that, as Ernie said, also we are very conformable in our per-store inventories at the store across all our divisions are pretty much where we want them to be.

Yes, I would say right now this is textbook where we would like to be. We couldn't ask for to be in a better position going into this quarter than where we are right in the inventories and the open a buy.

Thank you. Our next question is from Paul Lejuez. Your line is now open.

Curious about your future investment in e-com? What are those investments going to look like relative to what you spent in the past? Are you thinking about kicking them up? Pulling them back? And also curious as relates to e-com, if you included the e-com business in your US Marmaxx business comp, and your UK e-com business and the international comp, just wondering if it would move the dial?

So Paul very good questions, I would say the first one is on the investments, we are very methodical about it. So we don’t as others have we aren’t going in investing at the high service peak. So we are -- I guess you would call leveling off on our investments there actually, because we are couple of years in on the tjmax.com business. So again very comfortable, we like the traffic we are getting. We like to sales the way it's doing and on the flip side as you know what be coming up, be careful on your cost structure. So, in terms of the domestic e-com businesses which are really tjmax.com and STP, we have taken a hard look at the cost structures and making sure that we will keep our investment at a very appropriate level and in fact a leveling off level, I guess would be the best way to describe it. Also in Europe, similar approach and we are actually running that very efficiently and same idea with the investments we are looking hard and fast and all of that links into your second quarter why do we do all that. While our e-com business in total is only little over 1% of our total business so when you ask that question first of all what the e-com increase has helped our comp ES but what it register I would say not mathematically not that strong because it’s such a small percentage of the total today. Having said that, it's growing at a faster clip than the brick-and-mortar just a very small base of over 1%.

It's growing so fast that it would actually kick the comp up a bit not the region. If I, Paul, it's Scott, as Ernie said, it's 1% of our total sales growth by 1% by our total sales growth by definition the most you can round it would be to round it potentially a 1% in total, on TJX basis.

Yes, ironically, Paul, in Europe it would actually move the comp there a little bit because we’re little bigger in New York as a percent to our business. And I was just in Europe last week coincidently, and we spent quite a bit of time talking strategically about where we’re going with e-commerce as well as looking at the metrics and what it's doing for the total in terms of traffic et cetera. And it would actually move the comp in Europe, but not a full point, but a little bit just under that actually.

Thank you. Our next question is from Brian Tunick. Your line is now open.

Hi, wanted to stick with that Europe theme? Just curious, your margins there used to be 7%, 8%, I think you had somewhat more aspirational goals than that. So just curious what kind of comp do you need in Europe to get the margins close to that high single digits? When does Trade Secret become more neutral to the earnings? And then the second question, hypothetically at a 15% tax rate, you guys would be throwing off an additional $1 billion of free cash next year. So curious -- I know you have a mix of international as well as many domestic taxes, but is there really a thought internally that this is what could play out next year? And would you use that additional $1 billion for share repurchase versus dividends? Any thoughts along those lines would be helpful. Thanks very much.

I’ll jump in before Ernie talks about Europe in more detail, Brian. But it's just too early to speculate on potential impact of new policies or legislation until it's passed and then we’d only comment obviously if it's relevant to our business, so just too early at this point to speculate. And in terms of Europe, I’ll just start off for a second, then Ernie. Some of the biggest impact has been FX over the -- certainly couple of. This year, it has been with Canada. We’ve had opening up the new businesses, not new businesses, new countries in the last year or two. We’ve also been ramping up the number of stores. So with the 50 plus stores we’ve opened up both this year, I mean almost hit that level the last year, new stores since it takes several years to get majority to put a big of an impact on your earnings that in combination with the systems. And the infrastructure needed to support that score of store and certainly put it down. So, it’s really less about the comp, the same level of comp when you hit that three plus rang at all divisions. All things being equal as usually the break point, but with wage systems and opening up the number of stores in the countries put a bit of pressure. The only thing before Ernie talks about Trade Secret and Europe in general as we move to the fourth quarter, we purchased Trade Secret at the end of October a year ago. So, in terms of the deleverage, we would expect that to moderate and that'd be a meaningful impact as we enter actually the quarter that we’re currently in the fourth.

That’s what I was going on that. So, Brian, in terms of Europe, it’s the good timing for your question. I was there all the last week coincidently and we went hit a lot of floor walks with the merchants as well as our field store personnel and we are well poised for the fourth quarter. I have to tell you that I am extremely bullish on what I saw over there last week for where we are heading into mid-November in terms of mix in the stores and how we’re presenting and how we’re staff for servicing the customers, so feeling very good about that. The other things keep in mind there and this I think starts to answer your question at least in terms of yes comp would help. Why do I think the comp will get better is they're positioned well, but the sales that we have the flat quarter, we were dealing with unseasonably warm, unseasonably warm weather there. And you look at the environment as it is and we are clearly gaining market share. If you look at some of those results that come out and we don’t like to get specifics on that, but you can see that we are making very major in-roads, not to similar than we are see here. It’s just all of the numbers are lower there. There are bigger decreases, some store closings we just announced from a couple of the retailers over there, which you can figure out who they were. And so we’re very bullish on our market share gain there. The FX is really put a bit of damper on the margin rate starting now often and talking about how they have to come back to us at one point. And the medium-and short-term here that I am looking for us to continue to gain more customers and that team over there, I wish sometime you could see the team over there, they are extremely diligent and saying execution when times get tough. So one of the things I get them credit for, I think you notice the profit over there was slightly above our segment profit plan and that was due to how diligently, they control their liquidity and managed expenses on the quarter, when the sales are only flat. So I give that a lot of credit for same liquid watching expenses and get employees for availability of which you can imagine, they have enormous availability over there for the fourth quarter, so again feeling very good about that.

Thank you. Our next question is from Omar Saad. Your line is now open.

Thanks. Good morning. Great quarter, guys. I still wanted to ask about the comp guide for the fourth quarter? I know you initially gave that guidance last quarter, I think at the time you said you'd give more insight around it. You've been giving 2% to 3% comp guides I think for the last six or seven quarters until now, is there something different you're seeing in the fourth quarter this year? Is it just a more difficult compare? Are there other dynamic underlying that we should think about? Trying not to read too much into it.

So Omar, I would say that what you said right very end about, not reading too much into product with right attitude, we are -- this is a classic case of wanting to stay as we always have conservative in our planning and our intension here is to beat those numbers. It just we have a long way to go in the quarter and so we have planned to stock at the beginning of the year, up against one of our healthier quarters. When you look at couple of years' stock, we just thought it was on our end to be judicious and conservative. And it's really no dip in the math. So, again the last thing you said, I wouldn’t read too much into it. We are feeling good about it, but that’s the best way we thought to plan that quarter relative to the other quarters we plan to two to three.

Thank you. Our next question is from Kimberly Greenberger. Your line is now open.

Great. Thank you. Good morning. Scott, I just wanted to go through the 2017 growth investments? It seems like at least some of these will be rolling off in either the first or the second quarter of -- rather, let's go through the 2016 growth investments and I think some of them will roll off throughout calendar year 2017. You talked about the HomeGoods distribution center, the Canadian distribution center opened in the second quarter of this year, obviously once we get past Q1 you will basically have anniversaried those. But I'm wondering if you can just go through the list of 2016 investments and just talk about where you are in terms of the timing of how those investments are flowing into the expense structure? Including an update on your systems, upgrades that you're working on? And looking out to 2017, we understand you're not providing guidance today, obviously, but are there some expense pressures or investments that we should keep in mind looking out into calendar 2017? Thanks so much.

Hi, Kimberly. So just to cover, again as I said earlier really no new news here, so the biggest thing we call out we reiterated again on in this script today was that there is the 3% wage increase. So that we still have in the 3% impact next year in terms of EPS growth. In terms of other items, too early to make call on the FX rather than at this point it would be -- I mean it's clearly we sold out a 3% overall impact this year too early to make a call as in with the continued drop of the pound over the last two quarters. It would be some impact, but that’s about all. We are going to say at this point in time, there is too much buying that hasn’t taken place and all too really get specific in terms of what the impact on currency will be on our mark on. And as we all know there has been a lot of movement from the last two years at the end of currency, so too early to call on the mark-to-market, other than what we have in our guidance for the fourth quarter. In terms of the investment for both systems and supply chain, you are correct, we have the two DCs of Canada and HomeGoods that happen this year, but we really haven't been specific other than what we said in the last two quarters that we expected our supply -- overall supply chain in IT cost to be about the same impact next year. But again that’s not our -- that’s what we have been saying we will give further clarification on that on our year end call. So unfortunately no new news in terms of the specific timing of how it's going to impact the quarters in the next year.

Understood. Thank you for that Scott. I am wondering if you can just remind us what were the supply chain and IT headwinds that you articulated for a calendar year 2016 and your fiscal 2017?

We never actually broke out the specific other than in terms of an EPS growth we were really just calling out the FX and the wage increases. So other than and that’s really it.

Understood. Okay, thanks so much.

And the only other thing I would add is the thing that’s been bit of as Ernie talked about earlier and I think Ernie would say out, is the average ticket impact to next year, so too early.

Yes, really forecast exactly where that’s going to be.

Thank you. Next question is from Bob Drbul. Your line is now open.

Hi. Good morning. Just a couple questions. Can you talk a little about the month to month progression throughout the quarter? And the second question that I have is, can you talk about the performance of the home business, really both within HomeGoods and also within the home business at Marmaxx and how that's been trending?

Sure, Bob. We’ll talk a little bit about the progressions and Scott will get that a little bit together. On the home business I think we talked about it and one thing by the way I would like everyone to know is, our apparel business has been strong throughout the year and the last quarter. So, it has been healthy all the way across board, but our home business in particular as you guys can see from HomeGoods results has continued to take major market share and accelerate. That would apply to Marmaxx's home business is healthy. We don’t give the numbers obviously and I would just say domestically home continues to present an opportunity for us, and we will continue to expand their and execute. And again we like our model there, it's quite the treasure hunt and quite the impulsive model that has resonated extremely well with consumers, all year long and we don’t see that changing, so a great question.

And Bob in terms of the cadence and unfortunately to disappoint you, that’s been several years and that we don’t comment on the enter quarter sales trends.

Thank you. Our next question is from Mike Baker. Your line is now open. Q – Michael Baker: Thanks. So you're very liquid in terms of your open to buy? How quickly can you react to that and get product into the stores? What kind of lead time do you need to get things into the stores before Christmas?

Great question, Mike. This is we’ve talked about in some of the supply chain advantages that we’ve created over the last few years while we have enabled the merchants to do is by a little closer and we’ve probably saved and we can’t really give you an exact amount of time but it's really down to how about this, it's down there more like a few weeks. And it used to be double that not so long ago. So what that has allowed our merchants to do is continue to buy later into the season with more knowledge and take advantage of more inventory close out lists that sometime show up at a time when before, it would have become a pack away. And now we can become in season sales driver that is going for the vendor because they don’t have to deal with us on a pack away. And at the same time straight for our customers more importantly because they get to see this fresh goods hitting just before Christmas or just before Thanksgiving that are very fresh and just recently in other stores. So, great question, again it’s been one of the big needle movers I think in our buying approach over the last five or seven years.

Okay, great, thanks for the color. I don't know if other people stuck to the one question, I can't remember. So I'll try one more. SG&A, the expected deleverage is a lot less in the fourth quarter than it was in the third quarter, which by the way is opposite what you're saying about the gross margins? I'm wondering why that might be in the fourth quarter?

Yes, Mike. So we have the same amount of wage and I’ll call supply, the investments that we have and except last year, we’re in the fourth quarter, we’re against the contribution we made to our foundation and some incentive accruals that due to the great fourth quarter we had last year that were more booked, we’re a higher percentage we booked in the fourth quarter. So recycling that, so we have a benefit and that’s why we have the significantly lower SG&A rate in the fourth quarter.

Thank you. Next question is from Roxanne Meyer. Your line is now open.

Great. Thanks and good afternoon. My question is on the increase globalization of your product. I’m just wondering, if you can update us on your buying strategy, particularly from Marmaxx. As you take a more global approach to your product and merchandise? Thank you.

Okay. Roxanne, when you say global I just want to make sure answering the question correctly. When you say a global approach in terms of Marmaxx, are you referring to goods you see in the stores or?

Yes, and even in your prepared remarks, you talked about getting more eclectic goods from around the world in your stores. And I’m just wondering how you’re buying your merchandise?

Well, so we have few different ways. One is our divisions or more links up. So we have a division in Europe, which as many buyers in Europe division in Canada that travels to Europe and internationally, as well as satellite buying offices, we have buyers in Europe and satellite office to represents HomeGoods and Marmaxx. We have California buying office, they travel to other countries. Our buying offices do a lot more exploratory trips. All the different buying offices will try going in the new places where we think that our new categories of goods that will be exciting. Examples are like leather goods out of Italy. So or something that is out of Africa that would be great in the home deck area. Those are type of things you’re talking that we hit Marmaxx that a more global type buys. There’s clearly if you look, we even had like outdoor type items that are bought HomeGoods and is going to brought certainly obviously internationally purchase buy or so. We’ve added to like, I think I talked about the buying staff has doubled over the last 10 years and part of that buying structure is buying global merchandise, buying from other areas. So that has been a huge, huge advantage. That’s why we have the 1,000 buyers now. And when you see that, I think I mentioned that we have 18,000 vendors and that has growing up a significant amount really just the five years. A lot of those vendors are international vendors and are giving us that different flavor. So, it's a great question because what we get out of it we think is a differentiating piece in our mix that other retailers really can't show. And it's because as I said in my script that’s where I think where our sourcing machine and really we just have a very talented buying team that gets a lot of ground cover in a lot of parts of world. Hopefully that answers your question.

Thank you, speakers. So our final question for today comes from Richard Jaffe. Your line is now open.

Thanks very much, guys. And just a digression to Sierra Trading? It was an interesting acquisition several years ago, wondering how that's playing out, how accretive it's become and perhaps more importantly, could you talk about some of your learnings from that business? Thank you.

Sure Richard, so Sierra Trading Post when we acquired it we have -- and I think we have talked about this before, we have been going through some learnings in terms of remodeling the business, because the business, the website was much more promotional than as you can imagine we would wanted to be being an aggregate value our price retailer. So interesting timing I you would ask this question because we have recently taken a good chunk of that and gone to everyday value that when I say recently that was about a month ago. And we were not happy with our results prior to that as we were kind of wining ourselves off that situation, but since that we are feeling a much better about the day and day out traffic and purchases. We still are not all in all happy with the website business. It's a little early to tell. So we have really done after the store initiative, which I think we have talked about. We want -- we have got plenty of room now to find out a bulk of way of business because of this value pricing. We have done some reorg with merchants that are in place, and we are feeling really good about going forward there. And we will actually -- we have somewhat to can't talk about some interesting marketing plans for the website going forward that I think are going to pay this dividend along with the value pricing that we have started there. We're putting some new merchants there to help with the website business. And the store end of the STP business, we have actually been very with that one been a longer term success rate for us. It's just early and it's really early in the whole curve of building that business. So, we are going to have some sites that at yearend call will talk in more that depth. We won't go into that today. We will talk about at yearend call, some of the stores that we are going to open there and we will give more color I think on the total business at that point in time.

So, I believe that is the end of our call. Thank you all for joining us today. And we look forward to updating you at our yearend earnings call in February. Thank you everybody.

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