Ladies and gentlemen, thank you for standing by. Welcome to the TJX Companies Third Quarter Fiscal 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, you will need to press star one. As a reminder, this conference call is being recorded November 17, 2021. I would like to turn the conference call over to Mr. Ernie Herrman, Chief Executive Officer and President of the TJX Companies Incorporated. Please go ahead, sir. Thanks, Missy. 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 March 31, 2021. Further, these comments in the Q&A that follows are copyrighted today by The TJX Companies, Inc. Any recording, retransmission, reproduction, or other use of the same, for profit or otherwise, without prior consent of TJX, is prohibited and a violation of United States copyright and other laws. Additionally, while we have approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in that transcript. Thank you. Now I'll turn it back over to Ernie. Good morning. Joining me and Deb on the call is Scott Goldenberg. I'd like to start our call today by once again thanking our global associates for their continued hard work and commitment to TJX. As I've said before, I wanna give special recognition to those associates who have been physically coming into work in our stores and distribution centers throughout the pandemic. In recognition of their continued efforts, we have awarded a vast majority of them an appreciation bonus, which was the sixth appreciation bonus we have paid during the pandemic. Now to an overview of our third quarter results. I am extremely pleased with both our top and bottom-line performance in the third quarter. Overall, open-only comp store sales when compared to fiscal 2020 or calendar year 2019 increased an outstanding 14%. Importantly, our open-only comp sales growth was just as strong at the end of the quarter as it was at the start of the quarter. Once again, we saw phenomenal comp growth in our home categories across each of our divisions, as well as a mid-single-digit comp increase in our overall apparel businesses. Clearly, our great brands and amazing values continue to resonate with shoppers. Overall sales were $12.5 billion, which was over $2 billion more than the third quarter of fiscal 2020, and total segment profit increased by $285 million over the same period. Our strong results are a testament to our flexible off-price business model and our associates. I truly believe we have the best business model and the best people in retail. Throughout the third quarter, in the midst of uncertainty in the marketplace around supply chain delays and consumer behavior, our buying, planning and allocation, logistics, and store operations teams all did an outstanding job. They ensured our stores had plenty of merchandise for our shoppers every time they visited. Our flexible model has been a tremendous advantage in this environment. We've been able to expand and contract categories and merchandise in our stores so that customers have full racks and shelves to shop when they visit. I am very happy with our third quarter pre-tax margin increase. Our excellent sales growth and strong merchandise margin increase more than offset the outsize expense headwinds that we have been facing. Our strategy to surgically raise retails on select items is well underway, and we believe it is working very effectively as shoppers continue to see outstanding value every day. Lastly, third quarter earnings per share increased an outstanding 24% to $0.84. As we look to the fourth quarter, overall open only comp sales are off to a very strong start. We continue to see excellent availability of merchandise in the marketplace and are extremely happy with the mix of good, better, and best brands that we are offering consumers. We are confident that we'll have plenty of great merchandise in our stores and online this holiday season, and we will be emphasizing this in our marketing. I'll talk more about the fourth quarter in a moment, but first, I'll turn it over to Scott to cover our third quarter financial results in more detail. Scott? Thanks, Ernie, and good morning, everyone. I'd like to echo Ernie's comments and express our sincere gratitude to all of our global associates for their continued hard work and dedication to our business. I'll start today with some additional details of our third quarter results. As Ernie mentioned, overall open only comp store sales increased 14% over fiscal 2020, and overall sales increased 20% over the same period. This quarter marks the third straight quarter that overall comp sales increased mid-teens or better. I want to recognize the excellent execution on the part of our teams for managing through the supply chain issues facing all of retail and ensuring a consistent flow of exciting merchandise to our stores to support the outsized comp sales we've seen all year. In the third quarter, we saw consistent strength in our overall comp sales every month. Once again, we saw a very strong increase in our average basket across all divisions, driven by customers putting more items into their carts. Overall, average ticket was flat and improved for the fourth consecutive quarter. Overall, customer traffic was up, driven by a mid-single-digit traffic increase in the United States. As Ernie mentioned, we believe our pricing initiative is working as we've rolled it out to very select items across categories. We're extremely pleased that sales, inventory turns, and the markdown rates in the third quarter remained very strong where we have selectively adjusted our retails. Across each of our divisions, third quarter open-only comp store sales increase was also excellent. At Marmaxx, open-only comp store sales increased a very strong 11%, and divisional profit dollars were up 21% versus fiscal 2020. Marmaxx's home business continued its outstanding performance, posting a comp increase in line with HomeGoods, and apparel comp sales were up mid-single digits. Further, Marmaxx saw an increase in customer traffic, had a very strong average basket, and sales across all geographies were excellent. At HomeGoods, open-only comp store sales increased a phenomenal 34% with consistent strength across all major categories and geographic regions for both HomeGoods and HomeSense. HomeGoods saw outstanding increases in both customer traffic and average basket. We're also very pleased with HomeGoods divisional profit dollars, which were up 52% versus fiscal 2020. As a reminder, HomeGoods' margin is disproportionately impacted by freight increases due to its product mix. When looking at Marmaxx and HomeGoods divisions combined versus fiscal 2020, total open-only comp store sales for the U.S. increased 16%, and profit dollars were up 26%. In Canada, open-only comp store sales were up 8%, and at TJX International, comp store sales were up 10%. Comp sales at both divisions were driven by a strong increase in average basket. Further, similar to the U.S., home sales across all of our Canadian and European divisions were outstanding. Next, our overall pre-tax margin for TJX in the third quarter was 11%, up 30 basis points versus fiscal 2020. Our pre-tax margin increase reflects strong expense leverage due to our excellent sales growth. We also saw a significant increase in our merchandise margin, driven by strong markon and lower markdowns, despite 160 basis points of incremental freight expense. These increases more than offset substantial investments to expand our distribution capacity, higher incentive accruals and wage costs, as well as 50 basis points of net COVID costs. Moving to the bottom line, third quarter earnings per share of $0.84 were up an outstanding 24% versus $0.68 in FY 2020. Our balance sheet inventory is up 4% on a constant currency basis versus the third quarter of FY 2020. We were very pleased that our inventory levels on a per store basis improved in the third quarter versus both the first and second quarters. Again, and we can't emphasize this enough, availability of quality branded merchandise is excellent, and we're confident that we have plenty of inventory in our stores and online for the holiday season. Moving on to our liquidity and shareholder distributions. During the third quarter, we generated $1 billion in operating cash flow and ended the quarter with $6.8 billion in cash. In the third quarter, we returned $1.1 billion to shareholders through our buyback and dividend programs. For the full year, we have increased our range of our buyback by $500 million and now expect to repurchase $1.75 billion-$2 billion of TJX stock. Now I will turn it back to Ernie. Thanks, Scott. Now I'd like to highlight the opportunities that we see to drive sales in the fourth quarter. First, most importantly, we will deliver great gifts and value for the holidays. We are in a terrific position to flow fresh product multiple times a week to all of our stores and online this holiday season. Since reopening our stores last year, we have been buying with longer lead times from many of our approximately 21,000 vendors to compensate for supply chain delays. Further, our vast vendor universe is by far the largest in off price and has always allowed us to have quality branded merchandise for our shoppers. Importantly, most of the inventory we need for the holiday season has already been delivered to us or is scheduled to arrive in stores and online in time for the holidays. This leads me to my second point, which is that we are set up extremely well as a gifting destination for consumers this holiday season. Our store shelves are full with great gifting selections today, and we expect them to continue to be that way throughout the holiday shopping season. We expect to have something for everyone on consumer shopping lists and to offer an exciting and inspiring treasure hunt shopping experience. We also believe that our great values will resonate with consumers as much as ever in an inflationary environment. Third, our store locations are convenient for shoppers. Our stores are generally in easy to access strip centers and often near other high traffic retailers like grocery stores that consumers visit multiple times throughout the season, making for an efficient shopping trip. Next, we believe our holiday marketing campaigns, which started earlier this month, will help drive new and existing customers to our banners. This year, each of our divisions will showcase our differentiated shopping experience by reinforcing our value leadership, while also highlighting the fresh flow of merchandise throughout the holiday season with messaging such as endless selection, great prices all season long. In the U.S. and in Canada, we will leverage the strengths of our retail brands together in multi-banner campaigns. In Europe, we have a strong cross-channel marketing plan, which includes TV for the first time ever across all of our European markets. At the e-commerce, we launched homegoods.com in September and are happy to offer consumers our exciting and eclectic home selections 24/7. Looking ahead, we plan to bring more home categories to homegoods.com. On all of our e-commerce sites in the U.S. and in the U.K., we plan to offer exciting gift selections for the holidays that complement our in-store assortments. Like our stores, new merchandise will be arriving frequently on our sites, making for an exciting online shopping experience. Okay, beyond this year, we believe we are set up extremely well to significantly grow our market share and improve our profitability. On the top line, we see tremendous opportunities with our sales and traffic driving initiatives and our global store growth plans. We have gained significant market share this year, and we see excellent opportunities to keep attracting more consumers around the world. Giving us confidence is the appeal of our values, great brands, and treasure hunt shopping experience. In all of the countries we have brought our off-price concept around the world to, it has resonated with consumers seeking great brands and fashions at great value. In terms of profitability, I want to reiterate that we remain highly focused on improving our pre-tax margin profile over the medium to long term. We believe our top-line initiatives can lead to upside sales, which is our best opportunity to offset some of the persistent cost pressures we face. In addition, we're very optimistic about the margin opportunity from our strategy to surgically adjust retail while maintaining our value proposition for consumers. Turning to our ESG efforts, I'll start by saying that protecting the health and well-being of our associates and our customers remains a top priority as it has throughout the pandemic. I also am pleased to share with you that our 2021 Global Corporate Responsibility Report was published this past quarter and is available on tjx.com. The report summarizes our fiscal 2021 initiatives and progress within our four areas of focus, workplace, communities, environmental sustainability, and responsible business. In addition to our report, we have published an appendix of relative ESG data and frameworks, including our first disclosure that is aligned to select metrics from the Sustainability Accounting Standards Board, or SASB. You can learn more about our efforts in our report, but I'd like to share a few highlights of our latest work with you now. I spoke on our last call about our commitment to inclusion and diversity and our work to help support a more inclusive and diverse organization. Since that time, we are well on our way to launching a variety of new programs for our associates, including new mentoring programs, associate-led inclusion and diversity advisory boards, and expanded partnerships with community-based organizations to support our recruitment efforts. We also recently completed our Global Associate Inclusion and Diversity Survey, which will help inform our longer-term priorities. Looking ahead, we expect to publish our 2020 EEO-1 data by the end of the year. In environmental sustainability, we made progress on our global science-based emissions reduction target. We are pleased to report a 32% reduction at the end of fiscal 2021 in greenhouse gas emissions from our direct operations against fiscal 2017. Our global approach to reducing our climate impact includes emissions reductions actions focused on reducing our energy consumption and expense. Also, investing in energy efficiency projects and sourcing low carbon and renewable energy sources for our direct operations. I look forward to continuing to update you on our progress in this important area. As always, there is a lot more information on tjx.com. In closing, I want to again thank each of our associates around the globe who helped us achieve outstanding third quarter results. We feel terrific about our overall execution, very strong start to the fourth quarter and our initiatives this holiday season. We are in an excellent inventory position to flow goods to our stores and are confident our associates are in place to meet the sales demand. I want to reiterate my confidence in the future of TJX and our ability to grow our top line and profitability over the medium to long term. As an off-price leader in every country we operate in, we believe we are in an excellent position to capture additional market share for many years to come and to become a $60 billion+ revenue company. Now, I'll turn the call back to Scott for a few additional comments, and then we'll open it up for questions. Thanks again, Ernie. Just a few brief notes before we move to Q&A. In terms of the fourth quarter, we are very pleased that overall open only comp store sales growth to start the fourth quarter is up mid-teens. Keep in mind that comp sales growth in the fourth quarter of fiscal 2020 was a very strong 6%. As to our fourth quarter pre-tax margin, we're continuing to face significant expense headwinds. Specifically, we're currently expecting incremental freight costs to be about 80-90 basis points more than the third quarter. This is primarily due to the significantly higher market rates we're paying in order to secure capacity to ensure our stores continue to have plenty of inventory. Further, we anticipate that the combination of investments to expand our distribution capacity, incremental wage, and net COVID costs will be similar to the third quarter levels. Looking to next year, we feel great about our sales and customer traffic opportunities, the buying environment and our merchandise margin, and our ability to surgically adjust retails. As a reminder, this year, we've been benefiting from the huge expense leverage on our outsized double-digit comp sales. Again, we feel great about our top line and margin opportunities, but it's still too early to forecast comp sales or costs for next year. I want to reiterate what we said on our second quarter call, which is despite the continuation of outsized expense pressures in the macro environment, we believe our pre-tax margin can get very close to the double digits next year. To be clear, we expect the level of margin deleverage from the combination of investments in distribution capacity and the incremental freight and wage costs to be higher than it was pre-COVID, but less than this year. In closing, we feel great about our execution and strength of the business, both operationally and financially entering the fourth quarter. We have a strong balance sheet, and we are well positioned to take advantage of inventory opportunities, including pack away, that we believe will arise from the disruption in the supply chain, while also continuing to invest in the growth of our business and return significant cash to shareholders. Now, we are happy to take your questions. As we do every quarter, we're going to ask that you please limit your questions to one per person and one part to each question. We respectfully ask that everyone stick with this request to keep the call on schedule so that we can now answer questions from as many analysts as we can. Thanks. Now we will open it up for questions. It is now time for the question-and-answer session of today's call. If you would like to ask a question, please press star followed by one. If you wish to withdraw your question, you can press star two. Our first question comes from Matthew Boss. Your line is open. Great. Congrats on another strong quarter. Thank you. Ernie, I think you've made it crystal clear how you feel about availability of product today and through holiday, so I won't touch on that. But my question is, your mid-teen stack comp implies a top-line run rate exiting this crisis. It's nearly double your pre-pandemic trend. Is this new customers? Is this larger baskets? Is it a combination of both? Scott, are you seeing any pushback at all on pricing, and how best to think about expansion of the AUR initiative from here? Yeah, Matt, you know, good question, getting to the foundation of what's going on. Clearly, the run rate we're having is based on numerous things. I think, you know, we wouldn't be achieving these outsized comps. Yes, we're getting new market share, new customers, from the data we show, but we're also getting an increased basket. Scott can talk to that a little bit, but that's been happening really consistently. I think we mentioned that in the script. There's also a conversion thing that's also happening, Matt, where I think, you know, when the customers come in, we believe we're converting at a higher rate, so they're making the purchase because you know, there are certain times you have customers come in and they don't purchase, right? I believe we're running at a successful way in that manner because we have such good brands and great value out there. The fact obviously at the same time we've been surgically addressing the retail is a great indicator for the future, right? Because if we're getting the new customer, if we're getting increased visits, I would also look at it this way. We have a certain percent of our customers that are more occasional visitors and certain that are more regular visitors, and we're getting we believe you know increased visits as well. And again conversion is at a higher rate. All cylinders are hitting. I guess I would caution us not to assume that we will run kind of at a more like a triple the rate of what we used to run, as you look down the road. On the other hand, the market share we're gaining now, and we think so many of these customers are going to stick, right? We're obviously making many of them very happy with what they're experiencing when they come in. That bodes well for that we're acquiring and we'll be retaining some of these new customers as we go forward, which again, all is a great indicator. Your second question, was it around the margin or no? On the... The average retail. The average retailer, I guess, Matt? Yeah. Have you seen any pushback to pricing, and where does the AUR initiative go from here? Yeah. Okay. No, that's what it was. No pushback to pricing. We have had, I would tell you, a higher hit rate of success than we even anticipated. We thought, you know, there'd be a handful of items here or there that we would run into challenges with, but that has not been the case. It's been very few and far between where we've run into any hiccups on the adjusting of retail, which means as we continue to go ahead, and again, we will not do anything that jeopardizes our mix being at better retail than anyone around us on like-for-like product. We can't talk to price points obviously on different product. We're not responsible for, you know, the quality or the brands where they're retailed that we don't carry from other retailers. On the upstairs brands, so to speak, department store brands, we are feeling there's a lot more room for us to surgically do this well into the next few years. Feeling very bullish about next year as well. Hopefully that answers your question. It does. Best of luck. Thank you. Thank you. Our next question comes from Lorraine Hutchinson. Your line is open. Oh, thanks. Good morning. It sounds like you're really pleased with your inventory position for holiday. As you look into calendar 2022, is there anything that you're seeing that concerns you around product availability for spring? Lorraine, nothing. We are, you know, the teams. I would like to put in a plug again for our teams, where I give them so much credit on the way they manage. I think we had more unknown and volatility given the supply chain ups and downs and the way our business is trending back. You know, we talked to you and many as we talked back in the first half of the year, right? As you could see our trends starting to take place. I give the teams credit for stepping out and buying earlier, as we said in the script, buying more earlier to time the cadence of when we'd get the deliveries, and then anticipating some of these supply chain obstacles that were going to be out there. Now, obviously, as we said in the script, we have figured out a way. It doesn't mean we're not getting hit with paying the rates of moving goods with the supply. We're getting hit with all of that, but the teams figured out how to get the goods here. They've established, and I give the merchants, the buying teams, logistics, as I said in the script, everyone has participated in making this happen, planning and allocation. I get to see every week what we're placing for further out. I get to see the calendar 2022 that you're asking about, and I can see the trend that we're on for opening up for first quarter, for example, which is the beginning of what you're talking about next year. We are already heading to a very good place for February, March, from what I can see on the order. Yeah, I have no concern. One of the other things that's happened in COVID is TJX, I believe, when you look at all the branded vendors in the market, we are probably more important today than we've ever been. We're probably more important to the marketplace than we were pre-COVID. When you look at the amount of volume that we're doing with those upscale brands, I believe that we will continue to be able to leverage those relationships well through 2022. Hopefully that answers your question. Great. Thank you. Thank you. Our next question comes from Mark Altschwager. Your line is open, sir. Good morning. Thanks for taking my question. You know, understanding that it's too early to talk specifically about sales expectations for next year, just wondering if you could speak more generally to where you see the incremental opportunity from a category perspective at both Marmaxx and HomeGoods as you cycle these big, multi-year comps. Yeah. Mark, great question. Continuing, obviously our home category across the board, based on the behavioral changes that have taken place with COVID and the workplace either hybrid situations or more virtual or I'll give you another one. People are outdoors more. You've probably seen a lot of data on this, and probably that'll continue, which is affecting which type of apparel the world is selling, including us. I expect all of those related categories to continue to stay at a disproportionate percent to our business and trend that way, which we're excited about. Now, the home business pre-COVID for us was already trending, if anyone looks back, it's easy to forget about it. It was already trending very strongly. Now we are just trending more off the charts. I do believe that levels off, but leveling off, you know, when you're running 30 comps still leaves you in an extremely bullish home trend, I think, for quite a while. As we've seen and mentioned in the script, our apparel business has been reemerging and really some healthy, you know, high single digits here. I believe we are going to be one of the. When consumers continue to be value driven, especially on apparel, I believe we take more market share there as we look out. I would see. When you look to, you know, I would call it more of the active inspired apparel will continue to be something that we will, I think shine in, and as well as home. There are certain accessory categories I think we will tend to outpace in. Hopefully, yeah, we see a lot of opportunity there. A great question. Thanks. Best of luck for holiday. Thank you. Thank you. Our next question comes from Paul Lejuez. Your line is open, sir. Hey, thanks, guys. Ernie, wondering if you could talk about, you know, the sourcing of inventory, just maybe how it's different in the current environment relative to a more normal period. Maybe talk in terms of direct source versus in-season versus pack away, maybe the types of vendors you're working with, how that's evolved, and maybe even just frequency and size of buys among your different vendors. Thanks. Yep. That was good, Paul. That's a multiple. You were able to finesse Scott's rule, right? You have, like, a five-part. But I like it. All the same topic. Same topic. That's pretty good. The sourcing, it's quite appropriate based on everything going on. We're direct sourcing, what we always do. Let's start with we're closeout driven, okay? We in-season hand to mouth, buy the bulk of what we do. We buy very opportunistically that way. That, I would say that will continue the way it's going, and we've had all indications are, again, what I said earlier, that a lot of those key brands, as they. By the way, good retail across the board, as you've seen the results. Retail is pretty strong out there, obviously, right? What that does create, though, is for a lot of the public company brands that are wholesalers. It allows them, they wanna keep chasing that business with their more regular price accounts. It allows them to get bullish knowing that we're always there on the backside for the excess inventory. Let's start with that dynamic that's happening, which will happen more as, which is why we always like it when everyone's business is good in this environment as we go to next year. I think you're gonna see a lot of wholesalers now stepping out to be a little more bullish on their upfront orders for those retailers knowing that they have TJX for the later, for the cleanup, so to speak. I think that whole piece, which is probably one of the biggest pieces of our business, is looking forward to a tremendous opportunity as we move forward because of that dynamic. Direct sourcing, I think what you're getting at, which is, you know, we all do some business that way. I think that is just a piece where, you know, we'll look at, you know, if there's a void in a mix, and we'll do it very selectively. What you talked about on packaways, though, you mentioned packaways. I think that is something we very possibly, as we come out of holiday, could see a tremendous amount of packaways based on the supply chain challenges that a lot of the other retailers are going to, the whole market's gonna run into. If they end up with some late deliveries that don't make it in for Christmas, which is very possible, if they didn't plan their cadence correctly, then I think that is gonna spill off a great opportunity for us to have increased packaways for next year, for next fall, that we would be buying this January, February. I'm anticipating that could be a huge benefit to us. I think I'm missing one. What was the fourth? There was a fourth aspect. The frequency and size of buys, you know, as you deal with the different vendors. Okay, great. Yeah, well, the challenge we've had is we're buying very frequently, and the sizes of the buys vary by vendor a lot. What's been an interesting dynamic is we have some, and obviously we don't talk about them on the call, but we've had some amazing brands in one moment can have an enormous amount of goods. It's interesting because they could be trying to unload the goods now a little early, knowing that maybe they're running into trouble later. We'll have some other brands that have a lot less and aren't necessarily yielding as much as a brand who's typically as comparable a size. Overall, we've had to slow down as we were getting into the time period here because there's still more availability in total than we could handle. I would say it's the tip of that piece, ironically, is almost the same as pre-COVID, where you'll read some articles where the brands will say, certain brands, and I won't mention who they are, will say, "Oh, we're cutting back on the discount, quote, 'off-price channel.'" But they've said that for years pre-COVID. Then what happens is it goes in cycles where all of a sudden they say that for three to six months, and then they are more loaded later. We might do less business with a certain brand for six months, but we're just gonna do more with a different brand for that six months. It, the cycle goes back the other way. What's interesting on this is, we watch for those situations because typically, and this is better post-COVID, since we mean more to the market in general, I think some of those vendors that are saying they're gonna go less to discount are actually the ones that are still gonna want to, for the future, place some more orders up front that allow them reorders with some of the hot retailers, which in turn should come back and leave more availability. Hopefully, that all makes sense. Probably more than you need to know. Very helpful. Very helpful. Thanks. Thanks, Ernie. Great question. Thanks. Good luck. Thank you. Comes from Chuck Grom. Your line is open, sir. Hey, thanks a lot. Good quarter. Hey, Scott, can you just dive into the offsets you expect to see in the fourth quarter to help offset the incremental 80-90 basis points of supply chain pressures? Then, you know, any color specific on where you think pretax margins can land in Q4 specifically? Yeah, we not, you know, probably gonna be disappointed with my answer. I think it's similar to what Ernie has been alluding to. We feel great about, you know, the top-line initiatives to drive sales and our, you know, our merchandise margin and the cost, as I think the biggest thing we called out on the cost is the incremental freight for the fourth quarter, you know, in and around, you know, that, you know, 75-100 basis points, you know, 90 basis points more. A lot will just depend on what the level of the comps are. We said all the other costs are similar to, you know, the similar prices we saw the last quarter. Not much more to say in terms of what, where we'll end up. I think a lot will depend, again, on that level of comps that we're able to achieve. Next question. Our next question comes from Kimberly Greenberger. Your line is open, ma'am. Okay, great. Thanks so much. Fabulous to see the momentum in the business. Ernie, I wanna make sure I heard you correctly. I think you said the surgical price increase strategy is well underway. I'm assuming that means you started executing it here in the third quarter. It sounds like you've already got a reasonably good kind of level of feedback on how those price increases are being received by consumers, with basically no price resistance. I just wanna make sure I understand that correctly. I wanted to ask you about the benefit in gross margin. You talked about a nice expansion in the merchandise margin from higher IMU. Maybe that's a piece of the pricing and strong full price selling. I'm trying to just sort of unpack the moving parts in that gross margin line, you know, to uncover or reveal just exactly how great that performance is in merchandise margin. If you could just help us with some of the moving pieces in gross margin, specifically, since you saw that nice boost versus 2019, that would be helpful. Thanks. Kimberly, yes. Let me go right to what you thought you heard from me is exactly correct, the way you said it. We started very early, actually, as we were coming out of second quarter and going into third quarter, we were starting to do this pretty aggressively, but surgically. We did it very selectively, and that's how we're gonna continue to do it. The merchants are doing a great job at approaching it in an extremely analytical and as well as verifying that, again, our out-the-door retail is significantly below anyone else's out-the-door retail. Remember, the foundation of this is what's going on in this country, which is that wages and supply chain costs are hitting, you know, really like never before altogether. It is forcing retailers around us to either promote less or raise their retail. It is just creating a window of opportunity that we and the wage thing I have no reason to believe that ends. Our teams yes started back then. We had a significant amount of the selective adjusting of retail, and we have had very good success during the third quarter. Yeah, I just echo on what Ernie. We do a lot of customer surveys, you know, with you know our marketing group and everything. You know, first, one of the things that in the survey is our value perception remains just as strong as ever. Whatever we're doing, you know, selectively, the retail has had, to the best we can determine, no impact from a customer perspective. You know, as I think we said multiple times, we're looking at the turns, the sales, the categories, and everything has been consistent and, you know, strong, similar to the first and second quarter. We can't see any impact. You know, that's just from that perspective. In terms of the merchandise, you know, margin, we've seen similar again to the second quarter. You know, half of our benefit is coming from reduced markdowns due to the strong sales, and the other is by an increased mark-on. You know, we are seeing some cost increases, but we're having retail increases that are offsetting some of that. I think one of the benefits to having our average retail come down or improve over the last couple quarters is, as that happens, it helps us on our cost structure as well as you'll have fewer units to move in our stores, DC, and freight. We're seeing some of the benefit, you know, on that as well. To answer your question, it's about half of our benefit is coming from mark-on and half of it is coming from markdowns. In total, we offset a bit, you know, even with the higher freight costs, we went up slightly in our merchandise margin this quarter versus last quarter. Nice. Thanks so much. Thank you. Our next question comes from Simeon Siegel. Your line is open, sir. Great. Thanks. Morning, everyone. Congrats on the great results. Thank you. Ernie, just your comment earlier about the importance of the upstairs brands. Are you seeing any difference in concentration of the top brands now versus historically? Then sorry if I missed it, did you guys say what% of inventory was on hand versus in transit? Thank you. Simeon, interesting question on the concentration of vendors. Well, I would say it varies by family of business. Yes, I would say there is a little shifting, just like the environment has shifted. Certain categories are performing a lot better, which includes certain brands. What's happening is in those categories that represent certain brands, we're ending up with more brands there. This won't surprise you. Overall, I would say in the store, Simeon, we're ending up with some of the more, I guess, you'd call it casual brands, because that's the way the market has kind of gone, if you know what I mean. Having said that, as apparel has kicked back in, we do have some dressier parts of apparel where some of the more traditional brands are still, you know, I would say they've ramped back up a little bit. But if you looked overall, I would say the casual brands have shifted to make up a greater percent of our mix and less dressy, which, you know, again, that's a behavioral issue going on. Probably that type of trend continues for a while. I'm not going to give you the actual categories, but in home, as you can imagine, that's a greater percent of our business. We have some home labels that I think we're doing more business with today than we were a couple of years ago that have ramped up, and the complexion looks that way. What we do, Simeon, is at the end of the day, no matter who the brand is, the buyers' first focus is to make sure we're at the right value. It's interesting. We won't force. It's we try not to too much predetermine which brands we're gonna emphasize based on just what the brand is. We kind of do it based on how exciting is the value. I'll let Scott jump in on the second question. Yes. Simeon, the inventory, good question. The you know, the in-transit on order is up, you know, it's up about a little more than 5% in terms of the contribution of that total inventory that we have on our balance sheet. But it was up, it's similar to where we were up in the second quarter over, you know, fiscal 2020. Yeah, it is in that 5% range, more as a% of the total than it would have been two years ago. Having said that, as we've said, our both store and distribution on a per store basis, you know, versus 2020 was improved versus the second quarter, where we ended at the end of the third quarter versus the second quarter, which also had improved versus the first quarter. We've even despite our sales increases, we've been continuing to improve that inventory position, both in the stores and DCs. Given that we have a fair amount of inventory coming in, it should bode, you know, well for the fresh flow of inventory as all of this, you know, the vast majority of this inventory will be, you know, coming in over the next several weeks. Feel good about the fresh flow. I don't know, Ernie, if you have anything. Yeah, no, I mean, I agree with everything that Scott just said. You know, we are just bullish on the way we can flow and availability as we look forward, as we addressed on the other question. Great. Bye, guys. Congrats again, and best of luck for holiday. Thank you. Thank you. Thank you. Our next question comes from Dana Telsey. Your line is open, ma'am. Good morning, everyone, and congratulations on the nice progress. Thank you, Dana. Two quick things. As you think about real estate, remodels, relocations, what are you seeing and how is that working for each of the banners? You mentioned TV and marketing for Europe. How are you planning your marketing budget this holiday compared to last year? Thank you. All right, I'll let Scott talk on the real estate, and then I'll jump in on the marketing. Yeah. Again, I think we're extremely, you know, bullish on the real estate, both, you know, what we've seen this year. First, in terms of our new store openings, you know, we've been experiencing, you know, as good as ever in terms of beating both our pro formas across our division. So that's exciting. As we've said, we expect, you know, approximately the ability to open 170+ stores next year and then historically get back to that 4% growth, you know, where we were over 200 stores a year, you know, for many years averaging, you know, on that with, as you know, very, you know, 3-5 closings a year. So we love that aspect. In terms of the remodels, you know, we're doing over 300 this year. We don't have a number for next year, but it's gonna be significantly, you know, higher across our divisions. Part of that is, you know, that's something that's very important to us as one of the things that we have just continually seen, in this all this year, we've seen the same thing where, there's very little difference when you go from a store that's 10 years old to 20 years old to 30 years old. Part of that is we're just keeping these stores look fresh, and that's why I think our ability to run the comps has been as good as it's doing. I think we've also, in the lease rates on both the hundreds of stores that we come to a renewal period, our teams have done a great job across the board in getting lease renewals at lower rates than what we had contracted at. That's continued all year long. You know, it's starting as you get over time to, you know, being some meaningful dollars. Feel real good about that. The availability, you know, for the sites and what we're seeing, you know, we expect to see that, you know, for years to come, given the amount of store closures that have happened in the past two years. Yeah. On the marketing, great question. Our marketing spend. I mean, we're going after it this holiday in terms of driving to continue to gain market share. Our marketing spend is planned up significantly in Q4 versus FY 2020, with the idea to allow us to be top of mind for consumers during the holiday season, when, as you know, Dana, it gets very noisy around marketing, and we wanna break through. Our campaigns are designed to break through as best they can, you know, with the budget in terms of our creative campaigns, the way we execute them. By the way, more than half of our marketing dollars are gonna be allocated to digital advertising, which is where the consumers are. I think I briefly mentioned it. We're really laser focused on capturing the market share and driving customer traffic. We'll be reinforcing. A lot of the messages are really built around the competitive advantages on value that we show, our unique selection. We do that by showing certain product categories to remind the customer that we're gonna be in these categories for gift giving. I think that's always key for us because sometimes customers forget that we have such a wide assortment of categories. Our goal is really to win discovery shopping occasions, which is, you know, roughly half of all shopping occasions where people are seeking inspiration and a bit of our treasure hunt retail therapy that I think we can provide for the customer. Then, you know, we're leveraging the power of influencers and brand fans and we're giving her a choice via multi-channel messaging. You know, this is how we're spending the money. I just think we are so well positioned. Let's start with well positioned with our store execution, our merchandise, and then our marketing to help drive them into the stores. Thank you. You're welcome. Thank you. Our next question comes from Michael Binetti. Your line is open, sir. Hey, guys. Thanks for taking our question. Let me add my congrats on a great quarter, guys. Scott, I wanna ask you. I know on your comment about pre-tax margin getting very close to double digit next year, I think, is how you phrased it. I know pre-COVID, you know, it's a little too early to plan, but pre-COVID, always planned the business around a two to three comp. Is that how we should orient ourselves related to your comment? We, you know, flex our models up and down with our own assumptions on comps, but is that a fair assumption? You know, I'm just trying to think through the puts and takes on how you're thinking about it. You said deleverage on the combination of investments and distribution capacity, but you know, your COVID costs were a pretty big burden this year. Your store volumes will be much higher than 2019. I would think freight would be a net benefit to the whole year next year. I know on the last call you said you thought freight would be worse in the second half, gets a little better next year. Then you have some pricing. I'm just trying to think through the puts and takes that would end us below double digits next year as you think about it. Yeah. Again, too early to make the call. Again, as Ernie said, we feel great about the top line too. We haven't made a, you know, definitive call yet on what we think the comp sales will be over this year, but we- Although I would, I think we're thinking it'll be slightly above a two or a three. I would say, Michael, because, you know, with this type of momentum and the amount of customer acquisition, I think we'll be a notch above that. I guess that means 3-4. In terms of the other costs, Michael, the one thing I'd say is that the combination of freight, although not gonna be at the outsized, you know, deleverage that we're seeing this year of north of 150, we still expect because of, you know, at least the visibility to the first half- Right To be determined on the second to have more than the normal amount of freight deleverage. It's still gonna be a lot less, but still more than what we would have seen pre-COVID. We're only in the first half. We're hoping in the second half, Michael, to your point. Right ... that we level off on that. Yeah. Overall, though, for the year, still would expect it to be more. Yeah. The combination of the supply chain wage and freight, yes, less COVID, but we would still expect to see those to be more than what we are seeing pre-COVID. Now, as we get closer in to the end of the year and we see with the retail strategies and how we're buying and with the benefit we're gonna get from a higher retail, but yeah, we expect the margin to go up. What would it be over this year? The question is just what we'll be able to offset. In terms of to drive the margins even higher. Longer term, we again feel real good if once we have some level of stabilization, you know, as we said that, we would expect, if we have, headwinds that are closer to what we saw pre-COVID, that, we would with a three-four co mp, as Ernie just said, on a go-forward basis, we would expect to, you know, to be flat or leverage our business, you know, in the longer term from wherever we end up, you know, at the end of next year. Okay. Thanks a lot, guys. You're welcome. Thank you. Our next question comes from Laura Champine. Your line is open, ma'am. Thanks for taking my question. I wanted to talk about availability on the luxury brands because we've seen fewer of those in stores, and I know that it's tough to check a material number of stores, but it looks like there's something changing in closeouts for true luxury. Am I seeing something that's consistent across the chains, or is that more you buying towards trend and the trend is not on the luxury brands anymore? Laura, a very good question. I think it's a combination of both, and I think it's a fair observation. I would say in your traditional categories where you might have seen us have a little bit more luxury brands, we have a little less of that right now. As I mentioned earlier, it's also not where the action is, so to speak, or where all the trends are, which is much more casual, not luxury brands, more active, but we do have less. I don't think this is a long-term situation. I think this starts to go away as we get into next year on the less luxury brands. Also, as the apparel cycle, the more traditional, slightly dressier apparel cycle comes back, I think we'll see more of the luxury brands I know you're referring to, and I think it's an accurate observation on your part. In terms of total brands and best brands, as we would call it, by category, varying by category, yeah, we're in great shape there. The luxury brands are definitely a little less valid, but I would not think it's a long-term issue. If I can follow up on that, obviously it's not a material part of sales, and obviously traffic is great right now. Is there any concern on your part that you might lose some of that treasure hunt customer traffic towards the holidays because it's not there on the luxury side? No. Well, no, because that side of the business, the true luxury side is, it was very small to begin with as a percent of our business, and it also becomes more of the self-purchase, not the gift on the true luxury goods. Yeah, there's some gift giving there, but we have a lot of the gift-giving categories and items in depth. No concern at all on that. Again, no real concern as a medium term thing because I think this cycle's back as you go to next year. I could tell you, so that's one that you've noticed. I could give you a few other departments we actually also have a lot less of. Here's the beauty of our model. There's a few other departments right now that are a bigger deal than, say, luxury vendors that we are actually very low on, but we're running, you know, 15 comps. It's the stores are flexing, and as we mentioned, we're able to flex the entire store and go after where the exciting value is. Also, what I mentioned earlier is, again, our contract to our customer is to have on what we have in the store is to have exciting value and get ready for gift-giving season. We do that even though we are at times gonna run into pockets of either certain brands or certain departments or categories, like I just said, that we're not actually under on. Yes, there's just other things besides that we're actually light on, and it won't. We believe it won't impact our performance over holiday. Great. Thank you. Thank you. Thank you. The final question of the day comes from Omar Saad. Your line is open, sir. Good morning. Thanks for squeezing me in. I appreciate it. Hello? Did we lose you, Omar? Uh-oh. Hey, can you hear me? Oh, now we can hear you. Hey, sorry about that. I wanted to ask to follow up on some of the discussions you've been having around the pricing actions you've taken given the inflationary environment. Yes. Maybe you can and especially around the term surgical, you know, does that mean only a certain banner? Did you do it across banner? Did you try international? Or is it only certain products and categories? Also, Phillip, you know, kind of strategically as you are thinking differently about how you price your goods? Your merchants maybe used to use a cost-plus mentality, and now you're approaching it more from a value perspective, especially given the inflationary environment. Any kind of philosophical change in how you think about price and value would be helpful to understand. Thanks. Yeah. No, again, very good questions, Omar. Let me... there are two key questions you're asking. Let me go at both. They're interesting. No, we did not isolate the strategy to any one banner or any category. The selective retailing goods applies to Marmaxx, Marshalls, HomeGoods, every division we have in Canada, Europe, every banner, Australia. It is not, by any means, we have all the merchants in every marketplace looking at this. The approach to your second question, and it's really. I'm glad you asked this because you could think that we actually don't approach a cost plus. That is a formula we don't do. That is a formula that a traditional retailer does. What our buyers do is they determine the retail first, and almost we say, "Forget about what the cost is, what's the exciting value retail?" Then we work it back from there. How do you determine the value retail? You take your, you know, fashion and your brand, and you look at where it's being sold at other retailers. From there, we determine the significant retail gap we need to have between us and the other retail. That's how we establish the retail, not at what the cost is. That philosophy I just discussed just now, that is what is being utilized, I guess you would say, in every division that is doing this. It is international, it's everywhere. That is what allows us to make sure that the retail is still providing tremendous value because we're using a comp shopping of what is the retail on that item at other retailers, what is it selling for? That's how we do it. We don't do what the cost is to us. That's what we refer to as a markup wheel, which traditional retailers do that. We do not do that. It's a great question though, because you want one without the other. I like the way you asked it because you don't wanna go around surgically adjusting retailers if we were doing it off of cost, that you could run into trouble. This, you know, again, good question. Thanks, Ernie. Great work, guys. Thank you, Omar. I believe that was our Missy, that was our last question for the group. Thank you all for joining us today, and we'll be updating you again on our fourth quarter earnings call in February. Let me just say from the team here at TJX, we hope you all stay well, and we wish you good health and Happy Thanksgiving. Ladies and gentlemen, that concludes your conference call for today. You may all disconnect. Thank you for participating.