The TJX Companies, Inc. (TJX) Q4 2013 Earnings Report, Transcript and Summary

Carol M. Meyrowitz - Chief Executive Officer and Director Sherry Lang - Senior Vice President of Global Communications Scott Goldenberg - Chief Financial Officer, Executive Vice President and Principal Accounting Officer Ernie L. Herrman - President

Jeffrey S. Stein - Northcoast Research Jennifer M. Davis - Lazard Capital Markets LLC, Research Division Michael Baker - Deutsche Bank AG, Research Division Brian J. Tunick - JP Morgan Chase & Co, Research Division Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division Oliver Chen - Citigroup Inc, Research Division John D. Morris - BMO Capital Markets U.S. Howard Tubin - RBC Capital Markets, LLC, Research Division Daniel Hofkin - William Blair & Company L.L.C., Research Division Roxanne Meyer - UBS Investment Bank, Research Division Kimberly C. Greenberger - Morgan Stanley, Research Division Mark K. Montagna - Avondale Partners, LLC, Research Division Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division

Ladies and gentlemen, thank you for standing by. Welcome to The TJX Companies Fourth Quarter and Full Year Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, Wednesday, February 27, 2013. I would now like to turn the call over to Ms. Carol Meyrowitz, Chief Executive Officer of The TJX Companies, Inc. Please go ahead, ma'am.

Thank you, Elonne [ph] . And before we begin, Sherry has a few words.

Good morning. The forward-looking statements we make today about the company's results and plans are subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially. These risks are discussed in the company's SEC filings including, without limitation, the Form 10-K filed March 27, 2012. Further, these comments and the Q&A that follows are copyrighted today by The TJX Companies. Any recording, retransmission, reproduction or other use of the same for profit or otherwise without prior consent of TJX is prohibited and a violation of United States copyright and other laws. Additionally, while we have approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in that transcript. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Also, we have detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and the Investor Information section of our website, www.tjx.com. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release or otherwise posted on our website, again, www.tjx.com, in the Investor Information section. Finally, our fiscal '13 full year and fourth quarter comparable store sales are for the 52- and 13-week periods ended January 26, 2013, versus the same periods last year. Thank you. And I'll turn it to Carol now.

Good morning, everyone. And joining me and Sherry on the call today are Ernie Herrman and Scott Goldenberg. And 2012 was another great year for TJX, on top of many great years. On an adjusted basis, earnings per share increased 28% and our 5-year compound annual EPS growth was 21%. We achieved this profit growth on sales of nearly $26 billion in 2012, which was almost $3 billion more than 2011. Consolidated comps were up an extremely strong 7%, over 4% in the prior year. This marks the fourth consecutive year of very strong sales and double-digit EPS growth in a very competitive retail environment and volatile economy. All of our divisions delivered excellent results, and we begin a new fiscal year in a great position to continue our strong performance. After so many years of strong performance, we hear the question a lot out there, how are you going to keep this going? So let me be clear, we are very confident that our top and bottom line growth is far from over. In 2013, despite fewer selling days in the retail holiday calendar, we are maintaining our 10% to 13% long-term annual EPS growth model. It's important to recognize that we are maintaining this model while we plan to continue investing in our future growth in 2013, including our brick-and-mortar business, e-commerce and supply chain. We are confident that we will achieve these plans. And at the same time, we certainly have a management team that is passionate about striving to surpass these goals. As confident as we are in the near future, as CEO of this company, I will tell you that I'm even more excited about the long term, which will be the focus of our call today. With our brands, fashion and value mission, we have tremendous opportunities for the future, and we are well on the road to being a $40-billion company and beyond. Now I'll turn the call over to Scott so he can recap the numbers.

Thanks, Carol, and good morning, everyone. Just to remind you that the fiscal '12 adjusted numbers we refer to today exclude the impact of the A.J. Wright consolidation. Now to recap our full year fiscal '13 results. Net sales for the 53-week fiscal year reached $25.9 billion, a 12% increase over last year. Consolidated comparable store sales on a 52-week basis were up by a very strong 7%, well exceeding our expectations, and on top of very strong increases in the 3 prior years. Diluted earnings per share were $2.55, a 28% increase over last year's adjusted $1.99. This year's results included approximately an $0.08 per share benefit from the 53rd week in our fiscal '13 calendar. On an adjusted 52-week basis, EPS growth was up 24% on top of increases of 14%, 23% and 48% in the last 3 years. Foreign currency exchange rates had a neutral impact on EPS, which is the same as last year. For the full year, the consolidated pretax profit margin was 11.9%, a 120-basis-point increase over last year's adjusted margin and above our expectations, primarily driven by merchandise margin improvement and expense leverage on our above-plan sales. The 53 week -- the 53rd week also benefited pretax margins by an estimated 20 basis points. Gross profit margin increased 100 basis points above last year's adjusted margin, again, driven primarily by merchandise margin improvement at all divisions and expense leverage. SG&A expense improved 10 basis points over last year's adjusted ratio. A number of items impacted SG&A during the year, partially offsetting our expense leverage. These items include a contribution to The TJX Foundation, as well as the third quarter items detailed in today's press release, which together had a 30-basis-point unfavorable impact. As to inventories, at the end of the fourth quarter, consolidated inventories on a per-store basis, including the warehouses, were down 6%. We begin the fiscal year with excellent inventory levels and very well positioned to buy into the plentiful opportunities we see in the marketplace, and continue shipping fresh merchandise to our stores. In terms of share repurchases for the year, we bought back $1.3 billion of TJX stock, retiring 30.6 million shares. During the fourth quarter, we bought back $350 million of TJX stock, retiring 8.1 million shares. After reinvesting in growth, increasing shareholder distributions through our dividend and buyback programs and acquiring Sierra Trading Post in fiscal '13, we still ended the year with $2 billion in cash and short-term investments. Now to recap fourth quarter results. Net sales for the 14-week fiscal quarter were $7.7 billion, a 15% increase over last year. Consolidated comp store sales increased a strong 4% over a 7% increase in the prior year. EPS for the fourth quarter was $0.82, a strong 32% increase on top of 3 years of very strong growth. The 53rd week also positively impacted EPS by approximately $0.08 in the fourth quarter. In addition, foreign currency rate -- exchange rates had a $0.01 positive impact compared with a neutral impact in the prior year. Consolidated pretax profit margins were 12.5%, a 120-basis-point increase over the prior year. The increase was largely driven by merchandise margin improvement, with some expense leverage on our above-plan comp [ph] . The 53rd week had a 60-basis-points positive impact on pretax margins. The gross profit margin was up 140 basis points, driven by merchandise margin improvement. SG&A increased 20 basis points with expense leverage on our strong sales, more than offset by approximately 50 basis points from the impact of our contribution to The TJX Foundation, higher incentive compensation accruals due to the above-plan results and transaction expenses related to the Sierra Trading Post acquisition. Now let me turn the call back to Carol, and I will recap our first quarter and full year '14 guidance at the end of the call.

Thanks, Scott. Before I move to longer term, I'll highlight some divisional numbers for 2012, which were terrific. In the U.S., Marmaxx and HomeGoods delivered excellent performance, with comps up 6% and 7%, respectively, on top of 3 years of great results. Internationally, TJX Canada delivered a strong 5% comp sales increase. And TJX Europe had an outstanding year, with comps up 10% and segment profit up threefold over the prior year. Since our strong performance year-over-year speaks for itself, let me move to the future and our many opportunities to continue driving top and bottom line growth. First, we are convinced we will continue to attract more U.S. and international customers with our value. In 2012, customer traffic increased for the fifth consecutive year. Our comp growth has been driven by customer traffic since 2008, and we have also widened our demographic reach over that same time. Most recently, we've been excited to see a larger percentage of younger customers among our new U.S. customers, which bodes very well for our future. While we have grown our customer base in the last several years, our market penetration remains well below department store levels, which indicates to us that we have significant opportunities to continue to gain market share. We will continue working to attract and retain more new customers with our aggressive marketing, upgrading shopping experience, many in-store initiatives and above all, our extreme value. The next major opportunity is global store growth. We don't know where the end game is. But today, we see the potential to expand our store base by over 50% with our current chains in our current markets alone. We are raising our estimates today for how big we believe our U.S. businesses can be. And internationally, we will continue to see vast opportunities. At Marmaxx, we still have plenty of room to profitably grow our largest division. We are raising our long-term potential for Marmaxx to 2,400 to 2,600 stores, which is 100 to 200 more stores than our prior thinking. Marmaxx's consistent excellent results give us great confidence and the performance of our new stores have been outstanding, significantly beating our performance over the last 4 years. Further, we have been very successful in expanding the geographic opportunities for Marmaxx, opening up in many smaller, more rural markets, as well as large cities, like New York. We also continue to widen Marmaxx's demographic reach. We also see HomeGoods as an even bigger business than our prior thinking. We are raising our long-term view for HomeGoods to 750 to 825 stores versus our prior estimate of 750 stores. HomeGoods has also driven consistently strong results for several years, and its 2012 fleet of new stores significantly outperformed performance. Internationally, we see enormous growth potential for TJX. TJX Europe had a fantastic year in 2012, which is very encouraging for this important growth vehicle. Segment profit margin reached 6.6% in 2012, about a 400-basis-point increase over last year. Further, we are seeing broad-based strength across geographic -- geographies in very different economic climates. In Europe, we believe our opportunities are nothing short of staggering. For now, we see the long-term potential to grow to up to 875 stores, with just our current chains in our current countries alone. While we're still relatively small compared to 875 stores and don't want to get ahead of ourselves, we could see this number moving upwards in the future. In 2013, we will be steadily growing our store base as we take a prudent approach to growth. In Canada, we continue to see significant growth ahead. The launch of Marshalls has been successful. Marshalls has reached profitability in less than 2 years, underscoring our ability to expand profitably, internationally. We see the potential to expand this chain to about 100 stores in Canada. Overall, we believe TJX Canada has the potential to grow to about 430 stores. Beyond our current portfolio, we see many opportunities for global growth. However, we have brought our off-price concept around the world, our value proposition has resonated -- I'm sorry, wherever we have brought our off-price concept around the world, our value proposition has resonated with our consumers. We believe we are the only retailer in the world with our deep understanding and experience in successfully bringing the off-price concept to different countries, and that this is greatly underappreciated by others. In Germany, our 4-wall store contributions are approaching Marmaxx levels, which speaks to how much we have learned. We see our international knowledge as a tremendous advantage for future geographic expansion. Now to e-commerce, which we know is a topic on a lot of your minds. Our goal is to launch our T.J. Maxx website in a controlled small test mode in the back half of this year. As we have been saying all along, we believe e-commerce will be a huge opportunity for TJX, but we will take our time to do it right and make money doing it. More importantly, we will not disappoint our customers. It is also important to understand that with the success of our brick-and-mortar businesses, we view e-commerce as another way to reach consumers with our great value. Whether brick-and-mortar, e-commerce or mobile, we will be targeting an extremely wide customer demographic. Again, while we intend to start slowly, long term, we do see this as a great opportunity to the future of TJX. We were absolutely delighted to add Sierra Trading Post, an off-price Internet retailer, to our family of businesses in December. We will run Sierra as its own banner as we develop our TJX e-commerce initiatives. We are excited about the opportunities to gain leverage in both businesses. Sierra Trading Post is truly a diamond in the rough. We see Sierra providing immediate scale, giving us tremendous knowledge and infrastructure for our e-commerce initiatives. In turn, they can use TJX's merchandising strength to build their brand further. As we have brought Sierra into the fold, we really like the Sierra organization and people, and already see our similar corporate cultures working extremely well together. We believe the synergies between Sierra and TJX will yield very positive results in the medium and long term. The next major factor giving us confidence in our top and bottom line growth is our supply chain opportunities. As we pointed out many times, running with leaner inventories over the last several years has done great things for our business. It allows us to buy closer to need, giving us the ability to drive higher merchandise margins. It has also led to a more exciting shopping experience and better values in our stores, which we believe has driven customer traffic and the top line. The key here is that we are continuing with our supply chain investments to become even more precise at delivering the right goods to the right store at the right time. We are being very deliberate with this initiative, so we still have about 2 more years before we expect to start seeing the benefits from our investments. To wrap up on our future growth, I want to emphasize that while we clearly planned for the year ahead and have a 3-year growth model, our strategic vision for TJX goes well beyond that. As a management team, we are laser focused on sharp execution in the near term but are simultaneously looking forward to the future, aiming to position this company for successful growth for many, many years to come. We encourage intelligent risk taking, sharing ideas across divisions and test many new initiatives, constantly finding new ways to grow. In 2013, we will continue our investments to support our growth, investing in infrastructure, store growth and e-commerce as we position TJX for the next phase of growth and for fulfilling our vision of being a $40-billion-plus company. So summing up, I hope that I've shared with you today -- hoping that what I've shared with you today helps you understand why I'm so excited about the future and confident in our top and bottom line growth. All of our businesses delivered terrific performance in 2012, which we can build and capitalize upon in 2013 and beyond. We are growing our U.S. and international customer base and attracting younger customers for the future. We have increased our long-term growth estimates for our current portfolio and may move up the end game in the future. We are excited about leveraging the success of our brick-and-mortar businesses with e-commerce, another platform for our value proposition. Further, we are confident that our supply chain improvements will continue to be meaningful top and bottom line drivers. Beyond this, we believe we have so many new seeds to plant for our future successful growth. Our management team is focused on 4 large powerful divisions, which we expect to continue to leverage as we grow. As always, the extreme flexibility of our business model and our financial strength gives us tremendous confidence. As we begin a new fiscal year, our winning formula has not changed. We will continue to raise the bar in execution of all the elements of our off-price business model that we have made -- that have made this company great. Finally, above all, we remain focused on our value mission to be a retailer for today and for tomorrow. And now I'll turn it over to Scott, and he'll go through guidance. And then we'll open it up for questions.

Thanks, Carol. Before I move to guidance, I'll cover a couple of points. In terms of where Sierra Trading Post and our TJX e-commerce initiatives are reflected, both for guidance and reporting, they are included in our Marmaxx segment. Also, as we've said in our press release today, beginning with the second quarter of fiscal '14, we will no longer be reporting sales on a monthly basis. Instead, we will move to a quarterly reporting practice. While reporting monthly comps has been the retail industry standard for many years, the vast majority of retailers has now discontinued this practice. We believe that moving to quarterly reporting is the right thing for our company and our shareholders, as it reflects the long-term approach we take in planning and running our businesses. Now I'll move to fiscal '14 guidance, beginning with the full year. For modeling purposes, I'll remind you that fiscal '14 is a 52-week year compared with the 53-week period in fiscal '13. For the full year, we expect earnings per share to be in the range of $2.66 to $2.78 over $2.55 in fiscal '13. Again, fiscal '13 included an $0.08 benefit from the 53rd week. Excluding the extra week, fiscal '14 full-year EPS would be 8% to 13% over the prior year's adjusted $2.47. Our EPS guidance assumes consolidated top line sales of about $26.8 billion to $27.1 billion, a 3% to 5% increase over the 53-week period. For comp store sales, we are assuming a 1% to 2% increase over both -- increase, both on a consolidated basis and at the Marmaxx Group. For the year, we expect pretax profit margins to be 11.7% to 12.0%. This would be down 20 to up 10 basis points versus 11.9% in fiscal '13. Again, the 53rd week contributed approximately 20 basis points of growth in fiscal '13. We're planning gross profit margins to be 28.1% to 28.3%, which is down 10 to 30 basis points versus fiscal '13, which again, benefited from the 53rd week. We expect SG&A in fiscal '14 to be approximately 16.2% to 16.3% of sales versus 16.4% last year. Foreign currency exchange rates, assuming current levels, are expected to have a $0.01 negative impact on full year EPS growth versus a neutral impact last year. In fiscal '14, we plan to continue to balance the use of cash between investing to support our growth and returning excess cash to shareholders. We're planning capital spending in the $925 million to $950 million range. Our investments in store growth and remodels are planned similar to last year, and we will also continue our investments in our distribution network, systems and home office facilities. We are planning a stock buyback in the range of $1.3 billion to $1.4 billion and expect that our Board of Directors will increase our quarterly dividend by 26% on top of our 21% increase last year. Even with this level of shareholder distribution, we still plan to end fiscal '14 with approximately $1.7 billion in cash, which provides significant financial flexibility. For modeling purposes, we're planning a tax rate of 38.2%, net interest expense of approximately $29 million and a weighted average share count of 724 million shares. Now to Q1 guidance. We expect earnings per share to be in the range of $0.59 to $0.62, a 7% to 13% increase over last year's $0.55 per share. We're assuming a first quarter top line of approximately $6.2 billion. This is based on comp sales growth of flat to up 2%, both on a consolidated basis and at the Marmaxx Group. As to monthly comps, for February, we expect consolidated comps to be approximately flat versus a 9% increase last year. At the Marmaxx Group, we expect February comps to be down 1% versus 8% increase last year. For the combined March, April period, both on a consolidated basis and at the Marmaxx Group, we are planning comp sales to be in the range of 1% to 3%. In March, we are planning comps in the range of down 2% to flat on a consolidated basis, and a decrease of 1% to 3% at Marmaxx. In April, we are planning comp store growth in the range of 6% to 8%, both on a consolidated basis and at Marmaxx. First quarter pretax margins are planned to be 11.4% -- in the 11.4% to 11.8% range, flat to down 40 basis points versus the prior year. We're anticipating first quarter gross profit margin to be in the range of 21 -- 28.1% to 28.4%, down 10 to up 20 basis points versus the prior year. We're expecting SG&A as a percent of sales to be approximately 16.4% to 16.5%, a 20 to 30 basis point increase versus last year. This is due to timing of incremental investment spending to support our growth, which we expect will have a greater impact in the first quarter but flat year-over-year, as well as deleverage from e-commerce expenses. Foreign currency exchange rates, assuming current levels, are expected to have a $0.01 negative impact on this year compared to a $0.01 negative impact last year. For modeling purposes, we're anticipating a tax rate of 38.2%, net interest expense of about $7 million, and we anticipate a weighted average share count of approximately 733 million. Finally, our guidance for the first quarter and full year assumes that currency exchange rates will remain unchanged from current levels. I'll wrap up with our store growth plans for fiscal '14. On a consolidated basis, we plan to add about 165 new stores, with about 15 planned closings. This will result in approximately 150 net new stores for a total of about 3,200 stores planned by year end, increasing square footage by approximately 5%, which is at the high end of our 3-year growth model. In the U.S., with the continued excellent results and new store performance at Marmaxx and HomeGoods, we will continue our aggressive expansion of these businesses. Our plans call for us to net 75 new stores at Marmaxx and 30 new stores at HomeGoods. Internationally, we continue to grow our store base steadily. At TJX Canada, we plan to add about 20 new stores in fiscal '14, including 13 Marshalls stores. At TJX Europe, we expect to add around 25 new stores this year. Now we are happy to take your questions. [Operator Instructions] And now we will open it up for questions.

[Operator Instructions] Our first question today is from Jeffrey Stein.

Wondering if you can -- and Carol could possibly talk about what's kind of been going on in February? If we kind of call around, we're hearing that the early part of the month was pretty tough because of the weather and then some concerns over increase in payroll tax, higher gas prices, delay in tax refunds. Wondering if you've seen this in your business, given the fact that you now have virtually the entire month behind you?

Jeff, first of all, we are not seeing any difference in terms of the demographics. Whether it's a $50,000 income area or below or higher income, we're not seeing a difference. We are truly, truly being affected by weather. I mean, the difference is so dramatic between New England, which is comping negatively, and the Southeast and Florida, which is comping positively. We almost see it to a day. A few days after the snowstorm, as to the Midwest, we saw huge comp increases. In addition, our clearance levels are slightly below last year. We kept our inventory very lean in the colder zones strategically, because we knew it was going to be a colder and snowier month. So this is really absolutely a weather story for us.

Our next question is from Jennifer Davis.

My question is, of course, on e-commerce. Could you talk a little bit about what the site will look like? Will it be like Sierra Trading Post or more like a flash sale website or maybe a little bit of elaboration there?

It's going to like T.J. Maxx, and it's going to be great value and it's going to be very, very exciting. Sierra Trading, we are so thrilled with this acquisition and the combination of what we can bring to Sierra Trading, which we're not going to toy with because they are a great company. What we can bring to them is tremendous leverage. We can bring to them, certainly, financial backing, market penetration, the ability to get access to many new vendors and vice versa. In turn, they are absolutely brilliant in their analytics. They have a wonderful platform. We are less than 2 months into this and each day, we're finding more and more areas that we can leverage each other. But for right now, they're going to be a separate entity. In addition, they have a wonderful outdoor business, which we think could be very, very interesting for us in the future.

Our next question is from Michael Baker.

Geez, tons to ask here. I guess, I want to ask about the corporate G&A line. I think you've been investing a lot in e-commerce and systems and the like there. So it's been -- it's actually up, I think, 2x over the last years and up 47% this year. Should we expect that line item to continue to grow, grow at a slower pace, flatten out? Are we sort of past the investment stage of e-commerce? How should we think about that line?

Scott? Our investments are flattening out. Scott, you want to go through...

He asked a couple of different questions. I'll try to do one, so the difference there. In terms of corporate expenses, this year, clearly, we had a large increase in corporate expenses, the increase largely due to foundation, higher incentive accruals, a little with our STP transaction expenses and the third quarter items that we talked about, and the closed store expenses that we, again, talked about in the third quarter. Next year, we expect a significant decrease in our corporate expenses, from in and around the range of this year's $333 million to approximately $285 million next year. And again, it's the reversing of not spending as much money, although we'll still be spending in the foundation, not having -- we're anniversary-ing that closed store reserve and less -- a little less spending on the incentive accrual. So the bottom line is we have normal growth, but we do have a significant reduction in corporate expenses. As regards to incremental investment spending, we were on plan this year just to reiterate that, but it did have a -- certainly, there was a growth. But over next year compared to this year, we have a level spending in our incremental investments. So it's still spending in some of the same areas, systems, talent, DC, supply chain. But again, it is leveling off this year compared to the spend of last year.

Perfect. It makes sense. If I could slide in one more. I'm intrigued by Germany approaching Marmaxx 4-wall contributions. Any reason why the other countries can't do that? And then does, ultimately, Europe hit the Marmaxx total margins or is the infrastructure greater there such that it never gets to that level?

Well, we're learning more and more about each country. We're pretty happy with Poland. I think another area that's very interesting is our home businesses because both Canada and HomeGoods have been absolutely staggering. And Ernie will tell you a little bit about the momentum at HomeSense. The costs in Europe are a bit higher, so I'm not going to sit here and tell you that it's going to reach Marmaxx's level. We've given a model of, I think, about 8%. But obviously, in my heart, I think we can surpass that as we leverage it because we have 850 stores in the mix today. But we'll -- obviously, year-after-year, I think there is more potential there, and we'll be able to leverage it a little bit better. But costs are greater. But Ernie here, he was just over in Europe.

Michael, I was just there few weeks ago. And one of the things we've obviously fixed over there is the execution in Germany. And as we've done that, the 4-wall contribution has gone up significantly. I guess, before we start thinking about what the other countries could mean, Germany still has a lot of room for growth for us. So yes, we're excited about the potential. But like everything else, we like to be conservative in our expectations where we could go there. But it is -- as we like to say, Germany is one of the biggest potentials we see and a country the we're already in, and Carol had that in the script. On HomeSense, as we talked about, same iteration, we only have about 25 stores over there. So lots of opportunity with HomeSense, which has shown consistent performance, as Carol just alluded to, during this past year. Our home business, in general, has been healthy, but HomeSense, specifically in U.K., has been very strong. The other thing we're looking at, given the environment in the U.K. and in Europe, is there should be -- like we are with everything else, there should be some real estate opportunities. Things are tough over there. So we might find similar real estate opportunities actually in the U.K. in a place where we were starting to get at the upper end of our store count. However, there's some great real estate sites that may show up, so we're pretty bullish on that as well. So I guess all that says, yes, we think the profit model could go up there. But as always, we want to be conservative in our expectations. The other thing I wanted to bring up and this kind of plays into the real estate opportunity discussion we talked about earlier, when we're talking about the weather, similar to real estate, weather situations out there create opportunities for us in this model of business with opportunistic buying. So that is something everyone should keep in mind. We may get hit with the weather in the short term, but there might be a benefit later.

I also think, as Ernie is getting that execution going, and Michael, HomeSense, years ago, we didn't see the real estate opportunities. There may be some tremendous advantages there in the next period of time for us to even increase our HomeSense store count, so we're going to take a look at that.

Our next question is from Brian Tunick. Brian J. Tunick - JP Morgan Chase & Co, Research Division: So I guess 2 questions. First, just trying to understand inventory per store, down significantly. You're still making supply chain investments, I guess. Just wondering, particularly at Marmaxx now, what do you think the opportunity is to continue to find merchandise margin expansion? And then where are the inventory turns sort of now across the different businesses? I know HomeGoods had been where you made your investment. So where are they there versus the other chains?

Brian, we don't really talk about our specific turns. I can tell you that we certainly are turning a lot faster this year than we did a year ago, so we are pretty pleased. So do we see more opportunities? I mean, Marmaxx is planning their inventories a little bit lower this year. I think a lot of this remains to be seen. Because I talked about, probably for the last 2 years, about our investment in our supply chain. So we really don't know what that's going to yield. And we still think there's this great opportunity in shipping more perfectly, regionally, by category, by store. And we really won't know what that's going to yield, probably until 2 to 3 years out, when we get all our systems in play. So again, what we're doing right now is a little bit more, I won't say, totally manually, on a $26 billion business all manually, but more manually than we would like to, which just doesn't give us all the opportunity. So certainly, in Canada, there are some chains that have more opportunity to bring the inventories lower this year than last year, but we don't really know the end game to this yet. So again, we plan conservatively, and we hope very much to beat our plans.

Our next question is from Richard Jaffe. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: Just a follow-on with Carol. You've talked about the supply chain improvements and a couple of years out before we see these things impact. Is it simply software or is it more than software? If you could you talk about the various investments and how you see them playing out, software, DCs, in-store hardware, et cetera.

It's mostly software. It's mostly DC and software. It's not as much in-store. But obviously, as you move your inventories a little bit leaner, your stores operate more efficiently, and it's easier for the in-store labor to function and drive sales harder. But that's really where mostly our investments are. When we get the Marmaxx West Coast DC in, a very large portion of our goods come in through the West Coast, which is going to allow us to get to the stores a lot quicker. And it's both -- it's a regional and a chain DC, so we're pretty excited about that. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: Is it just one additional DC or there are several on the books?

We have shipping centers. We have a whole strategy. We have a whole game plan on our supply chain, which includes the Marmaxx DC. We're looking at some changes in HomeGoods in the future, which we will be investing in, to make that chain move quicker and more efficiently. And then we also use shipping centers, strategically. We add them in so that we can, again, get to the services stores faster. And sometimes, in some cases, even ship a store once or twice a day, if they're in a big city. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: Right. So this is all part of the supply chain initiative?

It's all part of supply chain initiative, exactly.

Our next question is from Oliver Chen.

Regarding your outlook for the comps in first quarter and next year, could you speak to us a little bit about what metric may moderate in terms of you forecasting low single-digit range versus the tremendous year you're coming off of? And as a follow-up, your earlier comments regarding the widening demographic, could you just elaborate on -- is that driven by your marketing or your product efforts? And also your comment on market penetration in regards to department store reach, could you just help us understand what that may mean quantitatively?

First of all, we're pretty much going in with the same model that we went in a year ago. Again, it's very important for us to work hard at putting a model together that makes sense, being somewhat conservative and beating that plan. So we don't look at the metrics and go, "Well, this is exactly what we think we're going to do." We look at it logically. We look at it last year. We look at it on a long-term trend. But having said that, last year, we put out a 0% to 2% and we ended up with a 7% comp. So we strive to beat the numbers. In terms of the wider demographics, as we learn to ship our stores better and, again, getting more focused by region, we find that an income level of $50,000 works for us and we have customers that are in an income level of millions. We just have a very, very wide demographic, and that's what's exciting about our business. Our market penetration in relationship to department stores is they have 35% plus and we are way under that, so that, again, gives us tremendous opportunity to grow. The last point that is very important is we have stores that are 18 years old that are still comping. There's not a lot of companies that can say that. We talked about the end game, we don't really know what an average store ultimately can end up doing. But our job is to take each individual store and figure out how we can drive sales in it.

Oliver, I'll just jump on, on one thing. On the conservative comps, one other thing to remember is, in our model, because we buy so close to need, we're able to chase. So we're able to -- no matter how conservative the plans are, as witnessed by what Carol said about last year, we're able to well outperform. And a lot of that is because of the model that we execute to. It allows us to, when things are good, continue to drive harder. And if it slows up, we can pull it back a little. So again, that's always something to keep in mind, I think.

Yes. Having said that, I don't think a lot of retailers were able to pull back their inventory as quickly as we did for February, looking at it by zone. It's the flexibility of the model. It's really a wonderful model.

Our next question is from John Morris.

I think it's for Ernie. Talk a little bit more about where you saw the strength in the assortment at Marmaxx in the U.S.? And you mentioned in your prepared remarks, maybe diving a little bit deeper into that, that you saw strength coming from some of the younger customers. And so maybe if you can tell us what's driving that? Is it -- what kind of product? Is it the product? And maybe talk about it in terms of a girls versus guys strength?

Yes, I would say, John, it's actually more about, I guess, age than it is about gender. So we have -- and Carol has talked about this before, we have tried to go after the younger customer, and it's interesting. That was I think part of -- in Oliver's question, he was asking demographic-wise, if product was part of the places that we've had a shift, and it is, and that we've gone after some more of the younger departments. I would tell you the success in the younger departments is we've been in an environment where there's plenty of opportunities in the market in the younger demographic -- younger age department, so that's really what we've driven hard. It's not really gender-based. It's really more about an age-based thing, which is, I think, what you were getting at. So we look at that, again, as part of the future. We want to capture the younger customer earlier so that they're our customer for us down the road.

So I think the other thing is our business, what is exciting is, even going into February, is our ladies apparel business is very strong. Our turns are terrific. So that really bodes well so that we have a home business that's very, very strong. And we believe that home across the board is going to be much stronger this year as percent to total for a lot of businesses. But having said that, our apparel business looks pretty healthy, so that absolutely bodes well for the future.

Our next question is from Howard Tubin.

You had some great TV ads running during the fourth quarter. What are your -- maybe you can give us an update on your marketing plans for 2013 in TV, in 2013 versus 2012.

I can tell you that our penetration is going to be even stronger. Our impressions are way up this coming year. We are really excited. It's probably a year that, again, we are going to leverage even greater than we did a year ago. We are finding when our brands are working together, they're taking the best of the best of each of their campaigns and they're using it. So some of the campaigns that work in the States, work in Canada, vice versa in Europe, which is allowing us to do things we haven't done before. Our tri-branding is absolutely terrific. Nan up in Canada is doing some very interesting new things. We are just getting more and more knowledge and more analytics around our marketing. So I think you're going to be pretty pleased. In addition to the impressions going up, Marmaxx is going to be on TV more weeks this year, which is exciting. And you'll be seeing some new things that you haven't seen before.

Our next question is from Daniel Hofkin. Daniel Hofkin - William Blair & Company L.L.C., Research Division: Just wanted to, I guess, get into the guidance a little bit from the standpoint of -- I know a year ago, your initial plan was basically the same comp guidance for 20 -- for the past year. Are you thinking there's the opportunity to deliver this type of upside again? I mean, not to hold you to it at this early stage, but is there anything that is becoming -- from a market share standpoint, you're seeing some of the full price retailers doing a little bit better? Do you think -- is that still the biggest opportunity for upside in earnings, from just sales and leveraging fixed costs?

Dan, we are going to do what we do best. And I'd be out of my mind to sit here and say, "We'll just do a 7% comp again." Again, we are -- we do everything and strive to beat our plans. We are very excited. But we have to execute our business, and that's what we're focused on. Daniel Hofkin - William Blair & Company L.L.C., Research Division: Yes, I mean, do you feel like merchandise margins have similar opportunities going forward? Or is it more going to be driven on just how strong the sales are versus your initial plan?

Ernie is going to do everything in his power to drive sales and drive the business. That's what we all focus on.

And actually, Dan, I have a comment here from -- if you think back in Carol's speech where she said, "We have a management team that is really passionate," and I would tell you, they are very passionate about driving sales. Their intention is to not just deliver the planned sales. But again, we can't commit beyond that as to what that means. All I can tell you is they are driven to drive sales.

Our next question is from Roxanne Meyer.

I was wondering -- I know you mentioned that weather played a big role in the February performance. I was just thinking about how other companies are also talking about the change in tax refund timing, increase in payroll tax. I was wondering if you had any comments about the change in consumer behavior, spending pattern, as a result of those things. And also, can you comment on the comp and margin contribution of some of your smaller rural stores versus other stores? And really, over time, what percentage of the fleet do you think will come from some of these smaller markets?

I mean, I can just tell you, our small and rural stores, we make a lot of money with and we'll continue building in there. As I said before, February is, across the board, I really don't -- for us, we're not necessarily seeing this change in the payroll tax and affecting our business. It's across the board, and it's very, very weather-related. So I really can't comment on other retailers.

Our next question is from Kimberly Greenberger.

Carol, it looks like about 11 of the 145 stores that you opened last year were in Europe. And I'm wondering, given what a great future opportunity that is, what is your plan for 2013 store openings in Europe? And what is it that you're looking for to drive an acceleration in the store opening rate there?

I think we're moving -- is it 21 or 26 stores?

25, I think.

25.

25, yes. We're moving to 25 stores. As I said before, what we don't want to do is to make the same mistake we made a few years ago and grow too quickly, so we are increasing the number. If there are some terrific real estate deals, Ernie and the team will definitely go after them. So if the number comes up a couple of stores, so be it if it makes sense. But I think that feels really good, and then we'll see what happens by the end of the year. We're still building the infrastructure. We're still building the talent. We're still teaching. Again, each time, each year, they get better and smarter, we'll be more comfortable about ramping up slightly.

Carol, given the sort of human resources constraints around that growth, is there a sort of upper limit that you have in mind in terms of either a number of store openings per year or a growth rate that you would prefer not to exceed in order to make sure that you've got the right infrastructure in place to support that growth?

It depends by brand. Marmaxx is obviously a lot easier for us. HomeGoods is -- again, we ramped that up a few years ago. In Canada, we are ramping the talent because of Marshalls, a new chain. In Europe, we talked a little bit about HomeSense opportunity. Different countries, you want to make sure that you have the right talent base there. So that would be a little bit more of an aggressive build. So between Europe and Canada, you really want to get that talent in place.

Kimberly, on that initial plan on Europe, that's where we've had a major focus on the talent build. Because we talked in the past, that's where we had to play catch-up a little bit. And we think we made a lot of progress there these last 12 months, a lot of progress. So we'll start to get more comfortable with more stores there as time goes on. But like Carol said, we want to do it in a very orderly, orderly timeframe.

Every year under our belt is a lot better.

A lot better.

Our next question is from Mark Montagna.

Just a question about your guidance. I think, normally on this call, you also give your fiscal year guidance for segment profit margins by division.

Scott will get you that.

If I might have missed it, can you just -- can you review that?

Yes, Scott?

No, you didn't miss that, Mark, so I'll take you through the ...

We were waiting for that question.

So just to get 2 things out of the way. Again, the 53-week calling out had an approximate 20 basis point benefit to fiscal '13. I'm going to be presenting the numbers on a 52-over-52-week basis and, again, x FX. Starting with Marmaxx, we have a comp plan of 1% to 2% against last year's 6% comp; segment margin guidance of 14.1% to 14.4% against last year's 14.5%; and sales, $17.6 billion to $17.8 billion. Moving to HomeGoods, guidance of 0% to 2% comp against last year's 7%, with a range of 11.8% to 12.1% against last year's 12%; and sales, approximately $2.8 billion. Canada, down 1% to up 1%, so a flattish comp on last year's 5%; with guidance 13.6% to 14.0% against last year's 14.0%, with sales of approximately $3 billion. Europe, 2% to 4% comp against last year's strong 10%; 6.7% to 7.2%, recall 7.2% is the highest we ever had in Europe, and that was a few years ago, against last year's 6.2%; a 50 to 100 basis point improvement on $3.4 billion to $3.5 billion in sales. And again, recapping, Marmaxx, a 1% to 2% comp on a 7% last year guidance; 11.7% to 12.0% against last year's 11.7%, or a 0 to 30-basis-point improvement on $26.8 billion to $27.1 billion in sales. Again, this is all on a 52-over-52-week basis. And that's it.

Scott, I think it's important to note, Marmaxx, because of e-commerce, because otherwise you'd be basically up 10 basis points.

Yes, so on that 2% comp, as Carol have reiterated, it shows us down 10 basis points. There is some deleverage due to the e-commerce initiatives, which I called out at the beginning of the guidance section, which we are putting STP and e-commerce in there. Real pleased with the STP division, it's a profitable division. We have growth built into our plan. But the growth -- still with the growth, we are at a profit margin that is not at the very high levels of Marmaxx. And we are still investing in the e-commerce business, so we have some incremental expenses. So as Carol noted, that's the reason for the delevered [ph] -- the base business...

Marmaxx base business is very strong.

It's very strong.

It continues to be.

Okay. And then do you -- don't you also give this for the quarter or maybe not?

No, we don't. You'll find out in a few months.

Our final question today is from Lorraine Hutchinson.

Can you talk a little bit about how you develop your long term store count goals? And then what role has the roll out of e-commerce played in your model?

Our e-commerce, right now, what we're planning is obviously the costs are all in and we're planning it very conservatively. So when we get to FY '15, we'll be slightly more aggressive. But today, our sales are very minimal. And again, our investments are all in those numbers. In terms of the store count long term, we look at, as I said before, what each business can really handle in terms of the opportunities for real estate, number one, and the talent to be able to back up and drive the sales. So we talked about Europe being a little bit more aggressive than last year but not being too aggressive; Canada, getting Marshalls up and running; Marmaxx being pretty stable, so that's 75 stores; and HomeGoods being 30 stores. Again, that team is pretty stable. So that's really the way we look at it, and our model is a 4% to 5% store growth per year. So I look forward to reporting our first quarter, and thank you very much.

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