Ladies and gentlemen, thank you for standing by. Welcome to the TJX Companies' Fourth Quarter Fiscal 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. And later, we will conduct a question-and-answer session. [Operator Instructions] And as a reminder, this conference call is now being recorded, February 26, 2020. I would like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc. Please go ahead, sir.

Thank you, Aelan. Before we begin, Deb has some opening comments.

Thank you, Ernie, and 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 April 3, 2019. 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 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 transcripts. We have detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release in the Investor 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 Investors 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. Before I speak to our results, I want to start with our thoughts on the Coronavirus and the Australian wildfires. Beginning with the Coronavirus. Our hearts are with the people around the world affected by this outbreak. Although TJX does not operate stores in China or the other countries that have been significantly impacted as of today, we have several global buying offices and our buyers who travel the world. We are monitoring the situation closely with the health and well-being of all of our associates being our top priority. As to the bushfires in Australia, we were deeply saddened by the devastation in that country. We are grateful that our Australian associates were all safe. To help with the relief efforts in Australia we have made donations to save the children management international and the American Red Cross has been designated to support bushfire relief in Australia. Now to our results. We are extremely pleased with our outstanding finish to 2019. Fourth quarter consolidated comp store sales increased very strong 6% well above our plan and over a 6% increase last year. Our earnings per share of $0.81 were also significantly above our plan. I am particularly pleased with the strength of the comp store sales growth at each of our four major divisions delivered a comp increase of 4% or higher. Customer traffic was once again the primary driver of these increases. This quarter marks that 22nd consecutive quarter of traffic increases at TJX, and Marmaxx. I also want to highlight that both our apparel and home businesses for the company were strong and in-line with the consolidated comp. Clearly, we gave consumers a compelling reason to shop us and make exciting purchases throughout the holiday season and beyond. For the full year, we also delivered terrific results. Full year consolidated comp store sales increased 4% and EPS was $2.67, both exceeding our original and most recent plan. Annual sales increased 7% to $41.7 billion well surpassing the $40 billion milestone. We were thrilled with this achievement for our company. More importantly, we believe we are far from finished growing. Once again, each of our four major divisions had strong customer traffic increases that were the primary driver of comp sales growth. 2019 marks the 24th consecutive year of consolidated comp store sales growth and the 12th straight year of customer traffic increases. This is a testament to the talented people that we have across our company. And I want to thank them all for another year of excellent performance. Looking ahead, we see plenty of opportunities to keep gaining market share around the world. The first quarter is off to a solid start, and we have a number of initiatives underway to keep driving sales and traffic. Longer term we're convinced our differentiated treasure hunt shopping experience and excellent values will continue to attract more consumers in the United States and internationally. Before I continue, I'll turn the call over to Scott to recap our fourth quarter and full year numbers. Scott?

Thanks Arnie and good morning everyone. As Arnie mentioned, fourth quarter consolidated comparable store sales increased a very strong 6% which was over a 6% last year, and again well above our plan. We're pleased to see strength both in apparel and home businesses throughout the quarter. Our comp growth was driven by increases in both customer traffic and units sold. As a reminder, our comp sales exclude the growth from our e-commerce businesses. Fourth quarter diluted earnings per share were $0.81 up 19% over the prior year $0.68, and well above our expectations. Now to recap our fourth quarter performance by division. We are very pleased at each of our four major divisions exceeded their comp sales and pretax profit plans. Further every division delivered a sequential comp increase versus their third quarter comp growth and achieved these increases on top of strong comps last year. Additionally, customer traffic was up and the primary driver of our comp store sales increases at each of our divisions, a trend we saw every quarter of the year. At Marmaxx comp store sales increased to strong 6% over a very strong 7% increase last year. Again this quarter we saw strength in both in our apparel and home businesses. Segment profit margin increased 20 basis points. HomeGoods comp store sales increased a strong 5% in the fourth quarter over a 5% increase last year. We were very pleased with the strong sequential comp improvement for both the quarter and on a two year stack basis. Segment profit margin was down 10 basis points. TJX Canada drove a fourth quarter comp quarter of 4% over a 4% increase last year. Adjusted segment profit margin excluding foreign currency was up 40 basis points. At TJX international comp store sales grew an outstanding 10% in the fourth quarter on top of a 5% increase. Again this quarter we saw comp sales strength throughout Europe and in our Australian business. Adjusted segment profit margin, excluding foreign currency was up 10 basis points. Now to our full year consolidated fiscal '20 results. Consolidated comp store sales grow strong 4% over a very strong 6% increase last year; customer traffic was up overall and increased at each of our four major divisions every quarter throughout the year. Full year diluted earnings per share were $2.67 a 9% increase over last year's adjusted $2.45. I'll finish with our financial strength. Our business continues to generate excellent cash flows and strong financial returns. In fiscal '20, free cash flow was a strong $2.8 billion. We continue to take a disciplined approach to capital allocation and our ROIC is one of the highest we've seen in retail. Now let me turn the call back to Ernie and I'll recap our first quarter and full year fiscal '21 guidance at the end of the call.

Thanks, Scott. I'd like to start with some additional full year 2019 highlights, which I will pull it out for you. Again, we are very proud of our strong comp sales increase over such strong results last year, and that we well surpassed the milestone of $40 billion in total consolidated sales. I also want to highlight that we have grown our consolidated sales by more than $10 billion in just the past four years alone, as we continue to capture market share. In 2019, we added 223 net stores. And over the past five years, we have opened more than 1,100 stores. We achieved this growth in an environment where we have seen thousands of store closings across the retail sector. We now operate over 4,500 stores including more than 1,200 outside of the United States. We were very pleased with our innovative and differentiated marketing plans, which we believe successfully drove customers to our stores and online. We believe that we are continuing to attract shoppers of all ages to our stores, including a significant amount of Gen Z and Millennial shoppers, which bodes well for the future of each of our four major divisions. Next, our overall customer satisfaction scores continue to increase. We continue to incorporate the valuable feedback we receive from shoppers to improve their experience. We are having success with our loyalty programs and see additional opportunity to drive more store and online cross shopping. We believe that all of this will allow us to continue to grow our customer base overtime. Lastly, we continue to make important investments in our supply chain and systems to support our global growth plans. Now I'd like to recap our full year divisional performance and our confidence that we can continue our successful growth going forward. At Marmaxx sales surpassed $25 billion and comp store sales increased 5% over a very strong 7% increase last year. With an average comp store age of about 20 years we believe this is an outstanding indicator of the underlying strength of this business. In addition to opening new stores, we continue to remodel and relocate stores to keep them fresh and inviting for shoppers. At TJ Maxx, we introduced a new store prototype and the early customer feedback has been terrific. We also launched Marshalls.com earlier this year and are happy to now offer shoppers in both TJ Maxx and Marshalls the convenience of online shopping. We continue to see excellent potential to keep growing our largest division. At HomeGoods full year comp store sales increased 2% over a 4% increase last year. We are very pleased with HomeGoods strong finish to the year with their fourth quarter comp being significantly higher than the first nine months. HomeGoods surpassed $6 billion in sales this year. And we still believe we can capture additional share of the US market and other market. At TJX Canada comp store sales increased 2% over a 4% increase last year. TJX Canada also delivered a strong finish to 2019 with a fourth quarter comp that was much higher than the rest of the year. We opened our 500th store in Canada last year and full year sales for the division top $4 billion at TJX Canada further extended his leadership position as the largest off price apparel and home fashions retailer in Canada by far. We continue to see significant opportunity to keep gaining market share in Canada. TJX international had an outstanding year with comp store sales increasing 8%. We are particularly pleased that we saw strength across all six of our European countries and in Australia. Our research shows that we continue to significantly outperform many other major European brick and mortar power retailers further widening in the comp sales gap. Going forward, we see an opportunity to grow sales in all of our existing countries. Back to e-commerce we saw another year of double digit sales growth. In the US we had categories and brands through our TJ Maxx, Marshall's NCR sites. In the UK we are very pleased with the continued growth of tkmaxx.com and with the success of our Click and Collect program, which we believe has been driving incremental visits to our stores. Longer term, we see the potential to launch e-commerce for some of our other banners and countries. Before I sum up, I want to spend a moment on corporate responsibility. The key point I want to make is that our smart for business, good for the world thinking has been our philosophy throughout our history. We are incredibly proud of this great company and our culture. Just as we deliver real value to our customers every day we believe our company also delivers real value throughout many corporate responsibility programs. As these programs continue to evolve, you can learn more about them on our website, tjx.com in the responsibility section. And I really encourage you to take a look at this. In closing 2019 was another great year for TJX following many great years. I could not be prouder of their tremendous efforts and excellent execution across our organization. Looking ahead, I see TJX in a position of enormous strength. As always, we remain focused on our off price fundamentals and delivering great merchandise at great values to consumers every day. Our 2019 results demonstrate once again the appeal of our values and treasure hunt shopping experience. Our increases in customer traffic and units sold effectively tell us that we are attracting customers and that they like what they see when they shop us. The consistency and the flexibility of our off-price retail model through both strong and weak retail cycles throughout our history underscore our confidence. We see plenty of merchandise available to support our continued growth. We are confident our world-class buying hours organization, which numbers over 1,100 associates and our vendor universe of over 21,000 vendors are major competitive advantages. I also want to recognize the exceptional talent we have across our entire company. We are extremely proud of the long tenures of so many of our associates and as we continue to add hundreds of stores and expand our organization, our focus on attracting, developing and retaining top talent remains crucial to our continued successful growth. It is our associates who bring our business to life for our customers every day. As we look at the retail landscape, we continue to see plenty full market share opportunities out there to be gained. As long as we execute well, we are convinced we will keep attracting more consumers across a wide demographic and keep growing our retail banners successfully around the globe. Our relentless focus on value will continue to be our winning retail formula. Before I turn the call over to Scott, we know you may have a lot of questions related to Corona virus. What I have to say is that at this time we have not seen an impact to our business and it is too early for us to speculate about the future. Again, our priority is the health and wellbeing of our associates and we have made certain adjustments in terms of travel and our global buying offices. We are monitoring the situation closely and thinking of everyone worldwide who has been affected. Now I'll turn the call over to Scott to go through our guidance and then we will open it up for questions.

Thanks Ernie. As Ernie mentioned we're monitoring the Corona virus outbreak closely, but at this time we have not included any potential financial impact in our fiscal '21 guidance. Now I will start with our full year guidance. We expect fiscal '21 earnings per share to be in the range $2.77 to $2.83. This would represent a 4% to 6% increase over the prior year's $2.67. This EPS guidance assumes consolidated sales in the $43.9 billion to $44.2 billion range, a 5% to 6% increase over the prior year. This guidance assumes a neutral impact due to translational FX. We're planning a 2% to 3% comp increase on a consolidated basis. We expect pretax profit margin to be in the range of 10.2% to 10.4%. This would be down 20 to down 40 basis points, versus 10.6% in fiscal '20. We are planning gross profit margin to be in the range of 28.3% to 28.4% compared to 28.5% last year. We're expecting SG&A as a percentage of sales in the range of 18% to 18.1% versus 17.9% last year. For modeling purposes we're currently anticipating a tax rate of 25.5%, net interest expense of about $16 million and a weighted average share count of approximately $1.2 billion. Moving on to our full year guidance by division. At Marmaxx we are planning a comp of 2% to 3% on sales of $26.7 billion to $26.9 billion and segment profit margin in the range of 13.0% 13.2%. At HomeGoods, we expect comps to increase 2% to 3% on sales of $6.8 billion to $6.9 billion. We're planning segment profit margin to be in the range of 9.8% to 10%. For TJX Canada, we're planning a copy increase of 2% to 3% and sales of $4.3 billion. Adjusted segment profit margin, excluding foreign currency is expected to be in the range of 12.0% to 12.2%. At TJX International, we're expecting comp growth of 2% to 3% on sales of $6.0 billion to $6.1 billion. Adjusted segment profit margin excluding foreign currency is expected to be in the range of 5.4% and 5.6%. Moving on to Q1 guidance. We are expecting earnings per share to be in the range of $0.59 to $0.60 versus last year's $0.57 per share. We are modeling first quarter consolidated sales of approximately $9.8 billion to $9.9 billion. This guidance assumes a neutral impact due to translational FX. For comp store sales we are assuming growth of approximately 2% to 3% on a consolidated basis and at Marmaxx. First quarter pretax profit margin is planned in the 9.6% to 9.8% range versus 10.1% in the prior year. We're anticipating first quarter gross profit margin to be in the range of 28.2% to 28.3% versus 28.5% last year. We're expecting SG&A as a percent of sales to be in the range of 18.4% to 18.5% versus 18.3% last year. For modeling purposes, we're currently anticipating a tax rate of 24.8%, $4 million of net interest expense and a weighted average share count of approximately 1.21 billion. It's important to remember that our guidance for the first quarter and full year assumes that currency exchange rates will remain unchanged from the levels at the beginning of the first quarter. Now to our store growth plans for fiscal '21. We plan to add about 170 net new stores, which would bring our yearend total to approximately 4,700 stores. This represents store growth of about 4% and similar to past years, reflects our plans to close only a handful of stores. Beginning in the US our plans call for us to add about 50 stores at Marmaxx, and approximately 10 Sierra stores. We also expect at approximately 50 stores at our HomeGoods division. In Canada, we plan to add about 25 new stores, and at TJX International, we plan to open approximately 25 stores in Europe and 10 stores in Australia. I'll wrap up with our fiscal '21 cash distribution plans. We remain committed to returning cash to our shareholders. As we outlined in today's press release, we expect that our Board of Directors will increase our quarterly dividend by 13%. This would mark our 24th straight year of dividend increases. In fiscal '21, we also expect to buyback 1.75 to 2.25 billion of TJX stock. Now we're happy to take your questions. To keep call in schedule we're going to ask that you please limit your questions to one per person. Thanks and now we will open it up for questions.

[Operator Instructions] And our first question today is from Paul Lejuez.

Hi, thanks, guys. Scott, sorry if I missed it. But did you go through the gross margin and SG&A detail just kind of the moving pieces within each of those line items in fourth quarter, specifically, also I was curious about merchant margin and what your assumptions are for merchant margin in first quarter and the full year of 2020? And then, just big picture on the HomeGoods business. You had some execution issues, I think, this past year, curious if you could say that those are behind you? Thanks.

I guess, I'll try to - I know there was like 5 or 6 questions, but I'll try to get to the first few of the gross profit. The gross profit performance in the fourth quarter, which was up 40 basis points versus last year was due to strong merchandise margin, which was up substantially, which was primarily due to better buying. As you would expect lower markdowns on the strong sales and less freight. Part of that was due to some, as we call that are in our earlier calls that even around the fourth quarter as we move from the third to the fourth. We would be renegotiating some of our rates that did happen, rates did go down less - we came in better than we expected. We also had some mitigation strategies in place such as trail utilization, other things. So our expense opportunities for good and we saw some freight. We had the same I would say continued pressure from supply chain. So overall, it was primarily driven by strong merchandise margins in the fourth quarter. In terms of, I think your second quarter was about Q1 gross margin. It's unfavorable '20. Again, this is probably pretty much the similar sort for the full year and the first quarter. Merchandise margin is essentially flat, up slightly on ex-FX basis. So we have better buying but then we're off - it's being offset by the continued supply chain pressures which are pretty similar for last year. We do have a - if someone asked about tariffs and like. We have a little bit more tariff pressure. Although tariff were less in the fourth quarter than what we originally thought, because they took the government dropped some of the tariff on the list for the items. We are still cycling the tariffs, which are a little more first half weighted as many of them were not implemented into the back half of the year. So I would say merchandise margin better buying offset by the supply chain pressures, which is a bit similar to our full year story. The only thing I would note is on the first - we're a little more first half weighted and first quarter weighted a little more of the supply chain pressure due to our ticket being down a bit more in the first half of the year. At the moment from what we see than we expect in the second half. And I'll let Ernie jump-in on the second.

So Paul on the HomeGoods question. Great question. We did have execution issues there. I have to say that the fourth quarter, the 5 comp on top of the last year 5, truly exceeded our expectations. We were hoping to, as we have talked about earlier in the last couple of calls, hoping to have some incremental progress over the prior trend. And we were pleasantly surprised to be able to run such a strong comp on top of the 5. I would tell you that we made great progress in some of the execution areas in terms of really fixing a lot of the imbalancing, a lot of the execution challenges. However, I'd say we still have a little bit of work to do there. And so we have not totally fixed them. Part of what happened is we got some, I think additional business drivers out of other areas of the store to a greater degree, as well as a great progress on fixing those areas at the same time, which led to this above plan or expectation performance. So I couldn't - I have to tell you, I'm very proud of that team for regrouping and the whole HomeGoods team. I think from the merchants to really the planning and allocation area in terms of the way they flow the goods was also a place where I think they just did a sensational job on coming back. And if you think about the Q4 business of which HomeGoods obviously has a strong Q4 business being home related and gift giving related. The way our planning and allocation teams across the entire Corporation. I know you asked about HomeGoods. But I would tell you a similar dynamic happens at every division, which is one reason our fourth quarter was so strong as our planning allocation teams and each of the four major divisions I think just did a fantastic job all around that that really helped propel our fourth quarter in addition to obviously, it was key at HomeGoods. Great question.

Thank you. And our next question is from Alex Walvis.

Good morning. Thanks so much for taking the question. Arnie you talked a lot in the prepared comments about market share opportunities around the world. I wonder if you could take a moment here to tell us how you think about your market share in each of the key areas, maybe in domestic home domestic apparel, and then in some of the international markets? And where you see those biggest opportunities for market share gains?

Sure. Alex, obviously you're asking a question near and dear to my heart and to this team in terms of what are the opportunities strategically. How do we look at this as we continue to go forward? I would tell you that one of the opportunities - if you're asking about domestic home apparel also in part of your question was International. Clearly one of the dynamics happening here on our market share gain is there's been and continues to be a fair amount of store closures of brick and mortar store closures in every geography that we're in. And there seems to be continuous - it's been steady over the last couple of years. And if you look at even year to date that continues. So obviously we do a lot of analysis at looking at a high level in terms of overlapping categories. So just like you mentioned, home or apparel. When we look at what's happening with store closures or what's happening with the market share slicing at the pie, we look at the categories that we're in which are home and apparel, accessories, any categories that overlap. And then we say what's our opportunity at the retail level based on the market share vacated by those stores that closed. And then we look at our - the same time our great relationships with vendors and all the different availability that's been around everywhere. For the last couple quarters as you know, we've been talking about all the different categories and vendors that have had availability and all the different levels that are from good level vendors, to better to best level vendors. And that would apply to Europe, Canada, U.S. and it applies to actually go home areas and apparel areas. And so when we look going out at market share opportunities, we just feel like it's right for the picking. And our business model and our emphasis on brands and quality at a price is what we ensure that our buyers are always focused on. So we continue to add to the buying team to ensure that we don't run out of all the additional vendors that we open and that we're always opening new vendors, which creates more availability, but it creates more treasure hunt shopping experience. So at the end of the day, to your question, why do we think we can seek any market share is we're going to keep having more exciting treasure hunt, experienced stores with more vendors, more categories and more changing mixes as we continue to move forward, which I not throwing a lot out there, which is really one of our advantages is we're creating this entertainment experience, which you didn't asked that in your question, but that is one of our key differentiators that is allowing our brick and mortar business to be really a different type of brick and mortar business than what the other retailers are delivering. So hopefully that - that's probably more than what you asked for. But I think that answered your question.

That's fantastic. Thanks so much for all the color there. Maybe one quick follow up for Scott here. Any comment on how we should expect the freight to impact gross margins in 2020 and what the puts and takes are there?

We have slightly less freight, you know, built in as a deleverage next year versus this year. I think that was not a significant difference, but a continued to improvement.

Thank you. And our next question is from Matthew Boss.

Great. Thanks and congrats on a blowout fourth quarter, guys. Ernie. Maybe what do you believe is driving the inflection more specifically in your international business if we think both about brand availability and customer reception to the concept? And Scott, on that note, just how would you size up the long-term store saturation target for TJX internationally, as we see here clearly?

I'll start, Matt. So I think internationally one of the things driving, yes, we've had more better brands within our mix, and we continue to add the team in Europe and in Canada. They have really gone after more fashion and better brands. And fortunately, the availability has been there but at the same time, you're planting seeds for the future, because now we've created these strong relationships with these vendors who want to have the continuity of the business with us. And at the same time with the economy being the way it is on these geographies, I guess we're a little lucky in that value. Our business is off price value. And value is so critical to those tough environments. So you can see there when you look at the results of even the online results have been stellar and their brick and mortar results, Scott is always showing me analyses which show we're picking up hundreds of basis points of market share in Europe. I'm actually underplaying that. And I really believe that nobody else is doing branded value like we are in those markets. We've always had a high penetration in Canada, but our penetration in Europe right now in the markets we're in as you know, from a comp like we just delivered. And forget the fourth quarter. Again, I'm proud of that team all year along and how the European team is executed. And it's really all about the value, nobody else - no other retailers there whether online or brick and mortars delivering branded value. There are some retailers, I won't say their names, but they're delivering more private label price pointed goods. But nobody else is delivering through better brands that have value. And that's why I think the - that's where the inflection is and where the opportunity continues to be.

Yes, I mean, in terms of just I think, Europe, given the strength of their comps all year was certainly a poster child of the consistency we've been - we've talked about this but consistency of their sales inside London, outside London throughout the UK, Scotland, also incredible consistency around the overall 10 comp and a 8 comp for the year in the rest of Europe. I'd like to particularly call out Poland was extremely above plan and above the overall average. And that's despite, even having less opening days on Sundays. But again, I think it's the - as Ernie said it's about the allocation process has been great. Obviously, the brands that they're getting the customer satisfaction scores, had been up in Europe and also in our domestic divisions, which certainly means, we're doing a good job. And again, it goes back to the other thing Ernie mentioned the e-commerce in Europe, where we have a bigger penetration of our ecommerce sales. We are very pleased to see that the ecommerce sales were strong and the comp stores in the stores are also both were working in tandem. So I think that's another real positive.

One other, Matthew, one other development, not development, dynamic going on. I mentioned the flow of our planning, managed by our planning allocation is across the divisions but in Europe as well as the other divisions, we are becoming as witnessed, I think by our healthy fourth quarter performances over a number of years, we’re becoming a more gift giving destination clearly for a lot of consumers. And what once maybe wasn't as cool to give a TK Maxx or TJ Maxx or Marshalls bag has now become very cool. And which lines up with our younger customer base that we've been going after over the last five or 10 years. So I think we have that that's another inflection that I think is helping us as our gift giving initiatives.

Yes and just one other thing. I mean, it goes back to the market share, but also taking, with some of, obviously Ernie called that the number of store closings, there's been. We - call it all our real estate teams, not just in Europe, but everywhere, where clearly, we think we've been improving and positioning our stores whether it's in relocations and or opening new stores. And our new store performance across the board and in Europe has been particularly good.

Great. And then just one quick follow up. I know it's early, but as we think about the potential sourcing disruption related to Corona as it relates to product availability? I mean, historically disruption is an opportunity for the off price sector. I guess help us to assess this situation. Do you think some of the disruption could create additional product availability for you and some of your off-price peers?

So right now I would have to tell you that really to us, our most important focus there is the humanitarian one. And we're really thinking about our associates, the health of them and the people around the world. We have no stores in China or the other countries that have, as we said, been significantly impacted as of today. We have global buying officers and buyers who are traveling. Our first priority is their wellbeing. But it's really too early for us to summarize anything bad could happen down the road. We're just more upset by all of the really sad stories that are happening around the globe. And so it's kind of what we said in the script.

Thank you. Our next question is from Kate Fitzsimons.

Hi. Thank you very much for taking my question. I guess my question would be expenses, just with the calm coming in better in the quarter, you know, overall SG&A did land ahead of your plan. Did you opt for greater reinvestment in the quarter to fuel the top line? And just curious as to how we should think about expense dynamics to the extent that comes, run better comps run better than two to three in Q1 as well as calendar 2020 just in this quest for a global market share. Thank you.

Kate, great question. This is a bit of a nuanced one that between answering your question on how it impacted the fourth quarter versus the full year, not all of the same things apply. Obviously, we're very pleased with our overall flow through on the beat of 30 basis points and 5 pennies. And yes, it would have been stronger. The strong operational performance caused us to have a few bit more expenses, more than at times we would normally flow through. Because of the strong performance versus our both our, our plans and our guidance our incentive accruals were higher but also absorbed more in the fourth quarter than what would normally have been spread throughout the year if our performance had been equal versus - beat versus plan across the board. So we were truing up a lot in the fourth quarter. Overall, I would tell you the incentive accruals and all that were similar collapsed year and our plans are similar next year versus this year. So a bit of that was just the timing and what you had to account for. Our supply chain pressure and store wage came in as expected. So that was not an issue. A kind of ironic, not ironic, but the way the accounting works is that, due to the extremely strong sales over plan, our inventories came in a lot less than our plan. So a kind of a dynamic, you don't see it to this point where we capitalized a bit less expense than we wouldn't norm normally have as the inventories came in lower. So again more, I would call that more of a timing issue. So again, a bit more than what you'd normally would've seen. And again, as we tend to do when we sometimes have extremely strong performance, we made a contribution to our foundation. So that's not something that would be necessarily a first quarter, second quarter impact. But in this case at the end of the year we did make one. And we had some unplanned legal expenses. But I would not expect to be, you know any at this point, any notes as we move through next year. So again, overall very pleased with the flow through.

Thank you. And our next question is from Omar Saad.

Thanks for taking my question. Good morning, a great quarter. Congrats on the year. Two really quick questions, the initial comp guide two to three, I think last year, a year ago, you guys started the year guiding the three to four. Just wanted to see if there's anything to read into that there, anything you're seeing on the, on the horizon this year that makes your outlook a little bit different. And then I was also hoping for maybe to expand the discussion on international, talk about the profitability, especially as you're competing there and those markets. Are you trying to get to scale in certain markets where we can see the margins building in that business over time? It just feels like your international footprint globally kind of growing. But I know each one is a, it's really a market by market basis. Thanks.

Great questions, Omar. Actually our sales guidance is similar to last year. We were at the two to three last year as well. So that's pretty much apples to apples. And I would say that given our EPS guidance, you realize we've talked about this before. Our intention always is to surpass those goals. So, we believe in trying to stay prudent and conservative in our plans. And believe me, every member of the team from the executive team all the way through the organization, whether it's - it doesn't matter which division you go to, everybody is moving towards surpassing those goals. And that their goals are to surpass the goal. So, we just believe this is in this environment, the right way to plan the business for a number of reasons.

Yes. I'll try to hit out. It's a bit of a difference. If you look, just explain fourth quarter for international and full year, again, extremely pleased with the 10 comp. And you would, you might ask infer why did we not leverage better. The underlying merchandise margin excluding the FX was favorable, but unfortunately the fourth quarter we had 70 basis - approximately 70 basis of excess FX pressure. So that was one of the major drivers of why at least for the fourth quarter and actually hurt us all last year was some mark on pressure. Again that answer I gave you on the capitalized inventory they - with the strong comps they capitalized less expensive. So again was a more of a timing difference. So, overall as you would have expected we would have been up extremely in a very high double digits if not more in Europe if not for those two items. Last year when we guided - this year we're guiding up Europe 20 basis points. Last year when we guided and we beat that. And substantially we guided down 80. Again we are up primarily due to the mark FX, impact on mark on this year; we have less pressure on FX, pretty similar expense pressures from FX from store etcetera. And so I think that's why we're planning our guidance or our guidance is favorable, extremely favorable this year than what we went out for last year. So, that's not much more to add there.

Thank you. And our next question is from Adrian Eves [ph].

Good morning. Let me add my congratulations. Very well done. Ernie, my question's for you. It's following up on your comment about better opportunities sort of at every level in every geography. I recall you mentioning sort of ecommerce dislocation as a secular trend that benefits you. Would you go over that again and the sources of availability that come from that? Thank you very much.

Sure. And yes, we have talked about that before. It's kind of a neat, dynamic from two perspectives, which is the opportunity - first of all, I think we've talked about this that e-com is providing a bit more for us now about validation of our values, whether it's the vertical brands being online or other non-vertical brands, because the consumer can see clearly what the value is there and that we have much better value in our stores. But more importantly, and I think this is what you're getting at in terms of the opportunities of availability at different levels of product because the good news is the ecommerce business across the board has just has a plethora of sub-money brands across all different levels in all categories. Everyone's gone into e-com, which is great. And but with that yields is more availability. And I think over the last three or four years that has been a plus to us in terms of availability that wouldn't necessarily have been in some of these categories before with some of those brands. Very difficult. And I think this is what we talked about in a little bit of what I think you're getting at difficult with those retailers to forecast accurately. The young businesses, the amount of units they should buy in an item or a category is a little more volatile than if you are brick and mortar with many years of history. And so that by its nature has been an added, I guess, like you started off with your question of added better opportunities. And that by the way, that is creating these additional, better branded opportunities across every geography, specifically in Europe and in the US. That's really where we've seen a lot of the e-com of, the byproduct of that coming from e-com business. Great question. And yes, we stated by the way, and that we are continuing to see that as, we move here into the first quarter.

Yes. Would like to hear your description of it. Thank you very much and best of luck.

Thank you.

Thank you. Our next question is from Lorraine Hutchinson.

Thanks. Good morning. As you think about the full year, can you just talk about little bit more about the operating margin puts and takes where we are in terms of laboring inflation, how you're planning freight for the year in total, anything you've taken into account from a tariff standpoint, and then any other factors, we shouldn't be thinking about?

Thanks Lorraine. So answer it two different ways. Obviously, we have a 6% EPS growth at the high end, which is similar to last year's 6%. We are down 20 to 40 basis points, which is less than last year on the same comp growth of 2% to 3%. So what that implies or what’s built into our guidance is stronger or better operational growth this year due to higher merchandise margin, as were planned up this year versus last year at this point in time. Our plans were, we had it, merchandise margin plan down. Part of that is due to your point on freight. Last year, we had less of a headwind from freight, but we also had some better mark on or better buying built into our plans. This year - we do have a small tower of hand witness here, but I wouldn't say that and FX offset each other. So overall better merchandise margin, better buying with less headwind from freight. The operational growth. So you'd say okay, our supply chain and other costs are about - we're saying are similar and offsetting each other, similar last year. But due to the stock growth that we had last year and doing a buyback in the same range of the 1.75 to 2.25. We have a lower benefit of our buyback of almost approximately 1 full percent. So higher operational growth, lower buyback hands while we have a similar 6% EPS growth on the 2 to 3 comp. Our supply chain. We continue to open up stores. We have a distribution center that opened last year in the second half of the year at San Antonio. For our Marmaxx chain we're opening up a HomeGoods, DCM Lewistown, and Ohio in the back half of next year. Hence, the supply chain pressure is relatively similar to last year. All the other things, all the other ones tend to balance out. So say it another way our headwinds - slightly less headwinds, that we're planning this year because of freight but being offset by a lower benefit from the share buyback.

Thank you.

Thank you. Our next question is from Michael Binetti.

Thanks for and congrats on a nice quarter. Scott, I guess I want to back up and just ask a little bit about margins in the leverage profile here. I think you usually talk about 20 basis points of leverage on every point of comp beat. I think you'd beat the comp point - the comp plan by about 3 to 4 points in the fourth quarter in pretax margins by a little less than would be implied by that maybe 30 or 40x currency. Can you just speak to I guess some of the puts and takes on leverage? How it rolls for you? Is the 20 basis points for pointing comp the right way to think about if we do start coming in above this year? And then I also want to ask on the HomeGoods business. The margin outlook for the year I know there's obviously some discrete pressures you just mentioned wages across the whole business and then maybe some more freight pressure focused on HomeGoods since past couple years. But given the exit rate of 5% at comps in the guidance for another year, similar margin compression in 2020, compared to 2019, I think the store growth slows a little. So maybe the preopen expense a little less, but I know you're still building up a supply chain fast. If only the margin profile would improve a little this year. Is there potential for the margins to beat on that business if comps come in better or should we think about it are there offsets we should think about to that?

So to answer of your first question, it again goes back to the answer where the fourth quarter flow through was 20 basis points, I'd say 15 basis points on the camp is probably a reasonable number. But this quarter we had, as again, we had the confluence of the timing of how the incentive accruals came in. We had the foundation. We had some unplanned, legal expenses and then the capitalized expenses related to the inventory. So again, along with saying some of those were obviously - almost everything there was unplanned, some of those would have flown through better in typical times and some of them were in essence are discretion in terms of foundation. And then there were some unplanned expenses. So I think, normal basis, it is still - I think it is still a good metric. This quarter was a couple of different items that caused it. And really more of the timing that it came in the fourth quarter versus one of the first 3 quarters. In terms of HomeGoods. The question on the overall margin. Well, first of all, again, the thing I'd focus on this year from up - again, we certainly love the way we ended the year in terms of significantly beating in our fourth quarter. As we - this year's guidance down 70 is substantially 50 basis points better than what we guided to last year. And two pieces of that, these new store investments are down a bit, but unfortunately this being offset due to the timing of the way to distribution centers opening at Lewistown. That the overall headwinds are a pretty similar, but merchandise margin is flat this year despite still having freight pressures. But certainly less freight pressures than what we have seen in the past. So I'd say the 2 pieces are slight improvement in the store deleverage, from the new stores and also stronger merchandise margin as freight has been monitoring. So those are the 2 big benefits versus last year. But I think the ability to flow through and outperform on and above plan comp is equal or better at HomeGoods as it is probably at any chain.

Michael, I would jump in and echo what Scott just said as far as our objective there just like any. And we have a healthy comp plan there. But the team has made improvements on some of those execution issues. And as I mentioned what happened in the fourth quarter or some of their other businesses. They are really having strong success - there any division, that division also is in a mindset to try to outperform their plans. So that is definitely the attitude.

Thank you. And we do have time for one final question. Our last question today comes from Kimberly Greenberger.

Okay. Fantastic. Thanks for squeezing me in. Great way to end the year. Ernie, I wanted to start just with a question for you on HomeGoods. The 5% comp in Q4 represents a really material level of acceleration from the first 3 quarters of the year. I'm wondering if you can just talk about the way you saw the year progress at HomeGoods. And what were the differences, you think in the fourth quarter that allowed for that level of acceleration?

Kimberly, great question. And it goes back to I believe, if you go back to not the third quarter call, it would have been the second quarter call. And we talked a bit about some of the not good execution we were having in some of the key categories there. One of the things we try to do and almost every family business has a balanced mix. And so at that first half of the year, we were getting hurt in some of the categories where we were not giving the wide assortment balanced mix in a way. And I really don't want to give what categories they were. But in a way that would have driven the sales and some of those areas were rather large in terms of the impact on HomeGoods. And as we got into third quarter, those areas started to get better. We had a little bit of improvement in the third quarter, if you remember, and to your point that we had major improvement now in the fourth quarter. And as I said before, it was a combination of really making; I would say 75% to 80% fixing the execution issues. But really, as I mentioned earlier, a lot of other categories. We found, the buyers found great opportunities to drive additional sales over what we were even hoping we were going to do. So you had bought, a chunk of the store that was really just outperforming any other trend that they were doing in the first part, which really comes back to execution. I would tell you that our field in addition to the planning allocation area there which flow the goods, 6 less selling days. Okay six less selling days and these guys managed to - as did Marmaxx, as did every division, six less selling days and we have this 6 comp on top of the 4 comp. So, I'm very proud of the team. The Marmaxx guys great also on their flow through. But specifically to your question that went after great gift giving and every division, I would say the other acceleration as I've talked about before the gift giving by our marketing teams have really supported the divisions across the board in terms of yes, you have to have the right goods. Yes, the stores the field organization in HomeGoods was incremental and as well as at the Marmaxx but the marketing teams also there. We really liked our creative on our tribe branding for holiday on the holiday campaign which I think we've gotten great feedback from across the board, HomeGoods was part of that. So, really, we were fortunate, Kimberly in that we had kind of had all Saunders [ph] hit. And I have to tell you we did not Scott and I did not we were pleasantly surprised. We were not thinking we would get to a five. We knew we were getting incremental progress from where we were. But we're very happy with what that team did. Hopefully that answered your question.

Yes, it's really great to see. That was perfect, Ernie. And then just one very quick follow up for Scott. Scott, if I step back and look at 2020 in totality, if a year from now we're looking back and you all have managed to deliver a 4% comp rather than the 2% to 3% that's contemplated in your guidance. Should we expect this roughly, excluding any FX pressures that might come that are not contemplated. That operating margin is sort of roughly flat for the year. And is that how we should think about the business on a go forward basis that is sort of 4 comp is a stable operating margin?

We're planning 2 to 3 comp. And if you're saying would we hope the beat it. I think, as Ernie said, we strive to beat it. And we'd hope to flow through 10 to 20 basis points, certainly on a 4 comp, if that's what was, if that was to happen. So, yes, I mean, that's - but I'm not saying that's our goal, our goal - what our go forward model is, I'd say if we beat it that if we do run a 4 comp, that's what would our goal would be.

Fantastic, great, thanks and congratulations.

Thank you, Kimberly.

Okay. Thank you all for joining us today and we look forward to updating you on our first quarter earnings call in May. Thank you, everybody.

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