Q1 2027 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to the TJX Companies First Quarter Fiscal 2027 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, May 20, 2026. I would like to turn the conference call over to Mr. Ernie Herman, Chief Executive Officer and President of the TJX Companies. Please go ahead, sir.

Thanks, Ted. Before we begin, Deb has some opening comments.

Thank you, Ernie, and good morning. Today's call is being recorded and includes forward-looking statements about our results and plans. These statements are subject to risks and uncertainties that could cause the actual results to vary materially from these statements, including, among others, the factors identified in our filings with the SEC. Please review our press release for a cautionary statement regarding forward-looking statements as well as the full safe harbor statements included in the Investors section of our website, tjx.com.

We have also detailed the impact of foreign exchange on our consolidated results and our international divisions in today's press release and in the Investors section of tjx.com, along with reconciliations to non-GAAP measures we discuss. Thank you. And now I'll turn it back over to Ernie.

Good morning. Joining me and Deb on the call is John. I want to begin by thanking our global associates for their hard work. I truly appreciate their ongoing commitment to both TJX and to our customers.

Now to an overview of our first quarter results. I'm extremely pleased with our excellent first quarter results. First quarter sales, profitability and earnings per share were all well above our expectations. Overall comp sales were up an outstanding 6%.

I am particularly pleased that each of our divisions delivered strong comp sales growth and drove increases in customer transactions. With our above planned first quarter sales, we are raising our full year sales and profitability outlook. John will give some more detail about our first quarter results and full year guidance in a moment. Our terrific first quarter performance is a testament to the strong execution across the company.

Our global teams work together as one TJX to offer customers across a wide demographic, excellent values and an exciting treasure hunt shopping experience every day. I am confident that our values and merchandise assortment resonated with consumers across all of our retail banners, and that each of our divisions grew their customer base. Looking ahead, the second quarter is off to a good start, and we have many initiatives underway that we believe can continue to drive sales and customer traffic. Availability of quality branded merchandise continues to be outstanding, and we are in a great position to take advantage of the plentiful opportunities we're seeing in the marketplace.

Longer term, we are energized by the opportunities we see to continue driving sales and profitability and expanding our global footprint and gaining market share in the U.S. and internationally. Now I'll turn the call over to John to cover our first quarter results in more detail.

Thanks, Ernie. I also want to add my gratitude to all of our global associates for their continued hard work and commitment to TJX. Now I'll share some additional details on the first quarter versus last year. As Ernie mentioned, our first quarter consolidated comp sales increased 6%, which was well above our plan.

Our first quarter comp was driven equally by a higher average basket and an increase in customer transactions. Further, we saw very strong comp sales increases in both our apparel and home categories. Pretax profit margin was 12%, up 170 basis points and well above our plan. Gross margin was 31.3%, up 180 basis points.

This increase was primarily driven by an increase in merchandise margin, a benefit from favorable inventory and fuel hedges and expense leverage on sales. SG&A was 19.5%, unfavorable by 10 basis points. Net interest income was neutral to pretax profit margin versus last year. All this led to diluted earnings per share of $1.19, up 29% and well above our plan.

First quarter pretax profit margin and diluted earnings per share were both well above our plan. This was primarily due to expense leverage on our above-plan sales, favorable fuel hedges and stronger-than-expected merchandise margin. Now to our first quarter divisional performance. Once again, we are extremely pleased that every division delivered strong comp sales growth and saw increases in customer transactions.

At Marmaxx, comp sales grew an outstanding 6% and segment profit margin increased 100 basis points to 14.7%. Comp sales in both Marmaxx' apparel and home categories were strong. Also, we were very pleased with the broad strength of comp sales across each of Marmaxx' region and income demographics. At our Sierra stores and U.S. e-commerce sites, which we report as part of this division, we saw very strong comp -- we saw a very strong comp increase.

We continue to see excellent opportunities to keep growing Marmaxx, our largest division across the U.S. At HomeGoods, comp sales increased a remarkable 9%. Similar to Marmaxx, HomeGoods saw strong comp sales increases across each of their region and income demographics. Segment profit margin increased 270 basis points to 12.9%.

HomeGoods offers consumers an exciting eclectic assortment of merchandise source from around the world, all at great value. We believe our HomeGoods and HomeSense banners are highly differentiated from other home fashion retailers and would be very hard for others to replicate. We see a tremendous opportunity to grow this division further and believe we are very well positioned to capture additional share of the U.S. home market. At TJX Canada, comp sales were up an outstanding 7%.

Segment profit margin on a constant currency basis grew 100 basis points to [Audio gap] across all three of our Canadian banners. We are Canada's only major off-price retailer, and we believe we are well positioned to keep growing our customer base across the country. At TJX International, comp sales increased a strong 4%. We were pleased with our sales growth in Europe and the strong sales increase in Australia.

TJX's International segment profit margin on a constant currency basis improved by 40 basis points to 4.7%. During the quarter, we opened our first store in Spain and the customer response was terrific. We are very excited about our growth plans in Spain and remain confident in the opportunities we see to capture additional market share in both Europe and Australia. Moving to inventory.

First quarter balance sheet inventory was up 8% and inventory on a per store basis was up 7%. We feel great about our inventory levels and the excellent availability we're seeing in the marketplace. As to our capital allocation, we continue to reinvest in the growth of our business while returning $1.1 billion to shareholders through our buyback and dividend programs in the first quarter. As we mentioned in our press release this morning, we have increased our fiscal 2027 share buyback guidance to a range of $2.75 billion to $3 billion, which will allow us to buy more opportunistically at favorable stock price levels.

Now I'll turn it back to Ernie.

Thanks, John. I would now like to delve into the ways we are playing offense to drive our top line and gain larger share of both the apparel and home fashions markets. First is how we're approaching our marketing. This year, many of our retail banners are launching fresh, new campaigns and exciting partnerships that continue to reinforce our value leadership.

Our marketing targets a broad demographic, including younger shoppers through a wide variety of channels with a strong emphasis on digital media. We are continuously testing new ways to engage today's consumers to demonstrate our value proposition, highlight the joy of shopping our stores and build loyalty among our customers. I am very pleased with the results we have seen so far, and I'm confident that our marketing strategy will continue to attract new shoppers and encourage existing shoppers to visit more often. Next is our exciting mix of merchandise at great value every day.

This all starts with our team of more than 1,400 buyers, who are in the marketplace throughout the year. They work with our vast vendor network to find the best assortments at the best values across good, better and best brands. Our planning and allocation team does the terrific work of allocating the goods based on the demographic characteristics of each individual store. This allows us to offer a curated mix of exciting categories and brands that we believe will resonate with shoppers every time they visit, whether it's their first time shopping with us, or they are a long-time customer.

Availability of merchandise is off the charts. In addition to our long-term mutually beneficial relationships, we typically add thousands of new vendors each year. We work hard to be the first call for vendors when they have excess goods. At TJX -- as TJX continues to open stores, grow its top line and attract broad range of shoppers, we believe we are becoming even more appealing to vendors, who are looking to clear inventory and grow their business.

Further, with our global footprint, we can introduce brands to new geographies around the world. As we pursue our future growth plans, we are extremely confident there will be more than enough merchandise to support our growth. In fact, the bigger we have become the more availability we see. Next is the in-store shopping experience and investing in our stores to our remodeling program and new prototypes.

We believe keeping our stores refreshed helps drive consistent comp sales growth across different store ages. Further, we continue to invest in our store payroll to maintain a high level of customer satisfaction and are always looking at ways to improve the store environment and the speed of checkout. All of this has led to very strong customer satisfaction scores at each of our divisions. Moving to our global store growth and increasing our exposure to off price around the world.

We now operate stores in 10 countries, and we see the potential to add another 1,700 plus stores in these countries alone with our existing banners. Again, we recently opened our first store in Spain and customer reaction has been outstanding. We are on track to open additional stores in Spain this year and are excited about our growth potential in that country. In Mexico, we are very pleased with our joint venture with Akzo and the Promoter Stores.

The teams are working together very effectively combining our merchandising expertise with their local operating knowledge. While still early, we are very optimistic about the long-term potential in Mexico. Regarding our investment in brands for less in the Middle East, beyond the current geopolitical environment, we remain confident in the long-term opportunity for that business. Lastly and most importantly, we continue to play offense by investing in the teaching and training of our associates.

I strongly believe that tenure and depth of our off-price knowledge and expertise within TJX is unmatched. We have a very deep bench and are laser-focused on developing the next generation of TJX leaders in order to maintain continuity in the business for many years to come. I am so proud of our culture, which I believe will continue to be a major contributor to our success going forward. Summing up, we are extremely pleased with our performance in the first quarter and with the opportunities we see for our business going forward.

Our teams across our entire organization are driving excellent execution of our off-price fundamentals. We feel great about our plans for the remainder of the year, and as always, we will strive to beat them. Throughout our 50-year history, we believe that the flexibility and resiliency of our business model and our wide customer demographic have been tremendous advantages that have allowed us to successfully navigate through many types of macroeconomic and retail environments. We are convinced that our strategy is to play offense and the characteristics of our business set us up very well to capitalize on the market share and growth opportunities that we see for many years to come.

Now I'll turn the call back to John to cover our second quarter and full year guidance, and then we'll open it up for questions.

Thanks again, Ernie. I'll start with our second quarter guidance. We are planning overall comp sales to increase 2% to 3%. Consolidated sales to be in the range of $15 billion to $15.1 billion, up 4% to 5%.

Pretax profit margin to be in the range of 11.4% to 11.5%, flat to up 10 basis points versus last year's 11.4%. Gross margin to be in the range of 30.9% to 31%, which would be up 20 to 30 basis points versus last year's 30.7%. We are expecting an increase in merchandise margins in the second quarter. SG&A to be 19.6%, 10 basis points unfavorable versus last year.

This will be due to incremental store wage and payroll costs. We're assuming net interest income of $28 million, which we expect to be neutral to the second quarter pretax. [Audio gap] Also assumes a tax rate of 24.9% and a weighted average share count of approximately 1.12 billion shares. As a result of these assumptions, we expect second quarter diluted earnings per share to be in the range of $1.15 to $1.17, up 5% to 6% versus last year's $1.10. Moving to the full year. We now expect overall comp sales growth of 3% to 4%.

We are increasing our full year consolidated sales guidance to be in the range of $63.2 billion to $63.7 billion, up 5% to 6% versus last year. We are increasing our full year pretax profit margin guidance to be in the range of 11.9% to 12%, up 20 to 30 basis points versus last year's adjusted 11.7%. Moving to gross margin. We now expect it to be in the range of 31.2% to 31.3%, up 20 to 30 basis points versus last year's adjusted 31%.

We continue to expect full year SG&A to be 19.5%, flat versus last year's adjusted 19.5%. We're now assuming net interest income of about $122 million, which we expect to be neutral to our full year pretax profit margin versus last year. Our full year guidance assumes a tax rate of 24.7% and a weighted average share count of approximately 1.12 billion shares. As a result of these assumptions, we are increasing our full year diluted earnings per share to be in the range of $5.08 to $5.15. This will represent a 7% to 9% increase versus last year's adjusted $4.73. I want to mention that we did not flow the entire first quarter pretax profit and earnings per share beat to the full year as we are now planning current fuel prices to remain in place for the rest of the year.

Of course, if fuel prices come down from their current levels, we would expect to see favorability to our full year profitability plan. In closing, I want to reiterate that we are excited about the growth and market share opportunities we see in the near term -- near and long term. We are in an excellent position to continue to invest in the growth of TJX while simultaneously returning significant cash to our shareholders. Thank you.

And now we're happy to take your questions.

[Operator Instructions] The first question in the queue is from Lorraine Hutchinson with Bank of America.

Ernie, you had called out ticket for a couple of quarters, and now the comp is equally transaction driven. Is this a signal that the customer is shying away from some of the higher-priced products? Or said differently, are you seeing any change in behavior from your customer based on macro factors?

Hi, Lorraine, no, no change in behavior. Again, we don't top-down drive that. We do it from bottom up with our merchants. And because we're across good, better and best, and we do monitor even purchases by income group, by ticket, et cetera, and we've seen no change in the pattern across any of that.

And Lorraine, similar to the last few quarters, when we look at the comp performance in Marmaxx by department, in the ticket change by department. There's no correlation at all of the ticket movement and the comp performance. So again, we continue to just see that we are pricing our goods at fantastic value against what the full price out-the-door retail is.

And to your point, Lorraine, transactions have remained healthy. And what's nice is the other thing that's consistent I guess one of the headlines today would be consistency is we're consistent across all our divisions in that respect, right, John, in terms of transactions. And then even the dynamics of what you were asking about, that applies to every division.

Next question, the queue is from Brook Roach with Goldman Sachs.

I was hoping you could elaborate on the cost implications that you're seeing as a result of higher oil prices and macro factors. Can you help us understand the magnitude of the fuel headwind that you expect particularly into the back half of the year? It looks like gross margins are expected to turn negative in the back and what the offsets that you see as a result of that? And then, John, can you quantify the benefit from the fuel hedge gain in the first quarter.

Yes. So the cost of the fuel, so when we -- we beat our guidance in the first quarter by $0.20, and we're flowing 13 to the year. That differential is the fuel cost that we've embedded into our plan. And we're assuming that the current fuel rates that we're seeing for diesel today are going to remain for the rest of the year.

So again, if we do see -- if the strait -- if the issues in the strait are resolved, and we see the price of diesel start to go down, we'll see savings against our plan. As far as the -- we're not going to parse out the components of our gross margin. But we did see a benefit because we are hedged in fuel, that benefit came through in the first quarter. So when you look at the back 9, it -- we've already taken the benefit of the fuel hedge assuming that the price stays where it is.

If the price continues to go up, then we will have more savings to that fuel hedge. Likewise, if it goes down, there will be a little bit of a hit from what we took in the first quarter. But our assumptions are that, that fuel price would remain flat for the remainder of the year, which may or may not happen.

The next question in the queue is from Matthew Boss with JPMorgan.

Congrats. So Ernie, strong first quarter, further comp acceleration, you raised top line for the year despite the macro backdrop. So is it value? Is it product improvement, or is it just great management here? And more realistic, can you...

This is a great question. Doesn't get bigger than that one, I guess. Keep going [indiscernible]

I figured it like this one. Yes. I do, I do. On the back end of it, is it new customer acquisition or -- or I guess, is there a way to think about the durability of the comp drivers in place? And as you talked about the good start to the second quarter, just kind of thinking beyond the quarter and the consistency and the durability. Where do we go from here?

Well, first of all, you have set the record. This is a 4-part question. That's good. But it's good.

It's under ABCD, right? So the -- while the value -- let's start with, as you know, we try to stay steady with the value proposition. I mentioned in the script, the 1,400 buyers that are going around -- in this environment, which you also referred to briefly, we always try to take advantage of what's going on in the economy, right, or in the markets. So like -- this is like any other, fuel prices can cause pressure all around the board.

We try not to get too theoretical about what the impact is going to be other than we know the better value we offer and the more exciting we make the treasure hunt shopping experience for our customers, the more market share we will gain. And I believe our teams did a great job in the first quarter, which is why those results -- and you asked about product -- it's both, product and value. We look at the nature of our product, the quality level, the fashion, the brand and at the price that it's at. Our merchants have done a terrific job on that.

And remember, when you have a situation like this where there's uneasiness out there, we look at it as an opportunity for us to capture additional market share. And the consumer is looking for [Audio gap] we'll have more consumers looking for value is an opportunity for us going forward. Secondly, I love the way we're positioned. We talk about our good start to the second quarter.

We are positioned so well going forward here with our inventories, our liquidity, the availability of merchandise, I believe I mentioned in the script. I think I said it was off the charts. We're always trying to think of new words to describe it. But we have, in most cases, I think the first call from the vendors, we mean more to them than we ever have before.

And yet our buyers are so good at maintaining such good level relationships with them. That I think that's why we have consistent great value on the floor from the right brands, which also is important. You mentioned new customers. One of the things that our marketing teams have done, and obviously, our goal is -- when you talk durability also, our goal is to increase visits from our existing customers, obviously, but to also attract another visit from our infrequent customer or an entirely new customer.

So a metric we're always looking at is our first time new customers that we're acquiring have been at a disproportionately younger age group relative to the general population. So that has continued. We've talked about that before. I think that speaks to our durability and consistency for the future because we're playing this for the long game, not just for quarter-by-quarter, right?

Weren't it for years of strong growth. So yes, where as you can see, we're very bullish on the year. That's why John and I took the guidance up on the sales, granted flowing it through in the profitability because it's -- clearly, it's not just about sales, it's about doing it profitably. And really, I don't know when we've done that before in the first quarter where we would have adjusted the year like this.

So yes, I hope I've answered your questions.

The next question in the queue is from Ike Boruchow with Wells Fargo.

This is Julianna on for Ike. I was wondering if you could expand upon the category trends that you're seeing within Marmaxx and then separately within HomeGoods.

Julianna, we actually don't give that information out. for understandable reasons, competitive reasons. What I would tell you is, obviously, when we run a 6 comp at and healthy across all the divisions is it's very widespread. So we have numerous categories contributing or, as you can imagine, the math never works. The business isn't as healthy unless we have most category trends taking place.

I can't really give you the -- I mean, I could, we just don't give the specifics of category trends. What I would tell you is, we are aggressive about the hot categories that have been helping to drive the incremental comp sales. We're aggressive with funding. We're aggressive with real estate in the stores, and we're aggressive with moving people with internally merchants, whether it's in planning and allocation or in our buying teams to the hot businesses to further fuel the procurement of those goods as well as the shipping to the stores.

We're very flexible, as you know, in our model. So one of our big advantages is hand to mouth, we can adjust to strong category performance, and we can back off weaker category performance faster than most other retailers that we know of. So without giving you the -- I can assure you, without giving you which categories that we will maximize the hot categories that we're experiencing. And we will actually downplay sooner than most ones that are just not performing that well.

Due to the speed of our churn...

Yes, speed of our turn is another point. We turn so fast. And you can see if you want to see that on a different [indiscernible] level, if you look at our home goods business, which just continues to perform at a rapid rate, one of our fastest turning businesses and probably one of the ones we are most adaptable in terms of moving fast, but Marmaxx moves super fast. Every division moves super fast on adjusting the category trends.

To John's point, though turns allow us to do that also.

Got it. And then maybe separately a follow-up, if I may. Going back to prior question on marketing and the new consumers you're seeing in the business. How much runway do you see left on these marketing improvements that you've had, just any commentary on there.

On the marketing -- well, we -- I'll tell you, we -- our marketing team, our core -- we see a lot of ability of opportunity going forward that we made a lot of improvement, and there's more we can still do we have. We've talked about this before. We've become a lot more sophisticated with our marketing mix modeling we're able to analyze and spend more wisely on the advertising vehicles and the campaigns that we utilize. So we are more efficient in our marketing.

If you look at the different campaigns, for example, Marshalls, we continue to run the Hustlers campaign. HomeGoods will continue to run the never shop the same campaign. At Canada, when we start to stop wondering, start winning campaign. We measure each one of these and we can determine whether or not we are going to spend the working media similarly to what we've been doing, or we're going to improve on it.

And these tools really have we've started utilizing these tools over the last few years greater than ever before. And I think we have a long runway to your question to continue to do more of that going forward. Also on the creative our teams are, I think, have done some of the best new marketing in years to try to go after new customers, at the same time, create a reason for an additional visit from our existing customers. So it's a two-pronged effort on part of the marketing team.

I think they've done an amazing job on it. So as you can see, I'm very bullish in a time when I believe TJX and every geography we're in can continue to gain market share marketing has become more of a weapon for us to continue to do that and play offense. You heard me talk about play offense in the script, and I really believe what any good business does, just like a good sports team is they're able to play offense and defense, but you always have to have good offense, and marketing is a tool for us that we're using more of as an offensive tool than we ever had before.

And I'll just add to Ernie's comments that we only have a single-digit market share for apparel and home in the U.S., and we still see opportunity to grow on. The other thing is we see a lot of opportunity to continue to grow our footprint of our store base as well. And so both of those are going to give us the ability to continue to gain market share.

The next question in the queue is from Michael Binetti with Evercore.

Congrats on a great quarter. Let me ask on the bridge to the Home Goods margin, really nice to see the margin there. How do we think about that through the year? I know you don't guide on margins just conceptually considering straight is what we're taking from EPS for the rest of the year?

I know it's pretty sensitive to that. And then maybe just a bigger picture on the HomeGoods margin. Maybe separate cyclical stuff from what's happening on the underlying efficiency of that business. I know you guys have some long-term goals for the profitability of that business and always look at Marmaxx as a North Star for what you like your businesses to strive for some day.

Just maybe orient us there. And then I'll just ask the opposite of Lorraine's question on transaction versus ticket. It's -- I think that was the clearest signal you've given us on traffic in a few quarters. It sounds maybe like it improved a little bit sequentially this quarter.

If that's the case, maybe why you think that is or if that's right?

Yes. So on -- I'll give you a little more detail on the HomeGoods. So I mean, the comp is -- when we look at leveraging one of the biggest levers that we can pull is on the -- driving the top line. And that allows us to to be more efficient in our expenses, which we saw in HomeGoods for our store in D.C.

And then, of course, merchandise margin improvement we saw as well. We're not giving full year guidance on HomeGoods. But again, we're -- as Ernie talked about earlier, we're hitting on all cylinders as far as executing that business model. And then your other question, I'm sorry.

Transactions.

Transactions. Yes. So the last couple of quarters, the basket has been the primary driver. In this quarter, we're seeing about half and half. We really don't look at it that closely because to us, it's really up to the customer, and our goal is just to execute the model to the highest level that we can, and we see the results in the top line.

Yes, Michael, over the we talked about this for many seasons, I think, is we sometimes have our average ticket go up and down the transactions dovetail and they can move around a little bit, but the thing that's difficult to measure in our price because it's not so preplanned and preprogrammed item to item is you can have some -- and mix can do it as well because we do a little like that other question was talking about, we will chase trends very aggressively, regardless of what the ticket wherever -- if it's going to drive sales, we don't worry so much about ticket or we worry about, ultimately, they're going to drive incremental sales.

So again, to John's point, it's kind of something we don't necessarily manage so specifically.

I guess I was wondering because if you did see something clear in a sequential improvement in traffic. I'm wondering if you tie that to some evidence that value you can see seeking consumer might be showing you some improving signs on trade down into the store or anything like that?

No. I mean, look, across all geographies, income demographic bands, we're very pleased with what we saw.

Yes, although to your point, yes, what we can tell you is we saw growth in all the income levels in Q1. So across the board, very consistent, yes, and remarkably consistent by income group.

The next question is from Jay Sole with UBS.

Ernie, you talked about how the open up store in Spain, it sounds like you're excited about what you've seen. You mentioned [ Grupo Acceso. ] I think it's been over a year now since you put out that 7,000 number for the total store count potential for TJX. I think you've essentially implied that again today. And it's also been over a year since the brand for last, and you mentioned [ Grupo Acceso. ] So what do you -- how do you think about potentially raising that 7,000 number.

I mean, based on what you've seen, what would give you the confidence to sort of say, hey, maybe we can be more, maybe we can do more. Can you give us a little color on that?

Absolutely, Jay. So where I can't be too specific here is these are things we're talking about internally. We're always looking at this, especially where I mentioned we're in 10 countries now. And you're probably also getting at domestically, we have successful brands.

There has been store closures and impending store closures in the U.S. and in other countries, such as in Canada as well. So as we speak, we are looking at it. And I think at one point, you'll see us revisit those numbers to you being very upfront with your question. So very timely question, Jay.

And John and his team and the senior team were very strategic and thoughtful about those issues before we come out with them. But we're feeling pretty bullish, and we know we have -- by the way, our model has worked wherever we go. As we've shown that when we put in the right people, we've learned in the past when we haven't put it in the right teams to start with in a new market. But to add fuel DeFi, for example, our Australia business is also doing really well, which, as you know, we started there about 10 years ago, and that has really had a good run.

And so we and Mexico to your point. And we have still here in the states, I think, given what's going on. So we will stand by to stand by, I would say, and we'll be back to you on that.

Got it. I mean that's super interesting. Would you say there's obviously opportunities to start entering markets from scratch like the ones you mentioned. Are there other opportunities to do partnerships like you've done?

Do you see maybe different regions where there's opportunity to establish a JV or minority interest in are that could sort of be an unlock to figuring out how to grow in an incremental market as well?

It's almost like you've been talking to a couple of people. But the -- all of those things you just said are of interest. I'll put it that way, yes, and various ways to about it, joint venture investment and are starting up or just new markets where we're already kind of in the market, and we can go to an adjacent country type of thing. So all of those things would apply us.

And we -- and your time is right because we show I think I talked about we have talent here. We up the talent over years. So we're able to do things now, and you've seen us do it the last few years, because we don't risk the core business in the way which you've seen that as we've opened up in Australia or Mexico, we've had zero distraction for our core execution across the big banners. And that's why we feel there's an opportunity exactly as your question would speak to.

And we spent many years preparing and making sure that when we went to a country that we understand the culture, the customer, what they look up for the real estate that we're looking for. And so that's why we've been successful in every country we've entered to date.

So your timing is good on your question and stand by to stand by, we will be back in touch, so to speak.

[Operator Instructions] The next question is from Dana Telsey with the Telsey Group.

Congratulations on the nice progress. One of the banners that one of the banners that I've seen that seems to be doing nicely is Sierra Trading Post. Any updates there? How are you thinking about the growth of that banner?

And then just lastly, so impressive, the sales growth and the operating income growth of every brand of every banner nearly double. Is there a difference between one of the other gross margin or SG&A that was the real driver for each? And how you're thinking of that sustainability going forward?

All right. So Dana, I will take Sierra, and John will take the margin. So in Sierra, yes, we've been very happy we're growing the store comp pretty aggressive. What the team has done a great job on over the last few years is really creating this different DNA and a good, better, best within that lifestyle from gear to outdoor apparel to various hard lines to a pet business to healthy outdoor food, and it gravitates to actually an upper income customer and the sales -- average sales per store, we've been very happy with over the last few years, which is why we're growing it.

And we don't talk about a lot because it's still kind of in its younger stage, but we're very bullish on the potential there as well as the different customers that it brings into us. We're also more highly email customer there than we are in some of our other brands, which is that is good, and they do tend to be some different customers. The market awareness isn't out there yet because we don't have that many in certain markets. So that's another thing we're working on.

The marketing team there has really worked on programs to do that in a very balanced manner given the size of the business and spending the appropriate amount, but the team, we really have strong talent in there. And I think you're going to see us talk about more about Sierra as we move forward because it will be 5 years from now, so to speak, a bigger player on the bottom line in TJX.

And then, Dana, just to answer your question about the sales and profit, the profit margin expansion. I mean, it just -- it really comes down to the just continued executing the model at a high level. And again, Ernie talked a lot about earlier in the call, about being liquid and being able to respond to the customers' needs as by turning quickly and going after those hot departments. So it's nothing more than that.

Our next question is from Bob Drbul with BTIG.

Great results. A couple of questions for me. I guess the first one is in terms of the U.S., are the full price selling trends continued at a very high level. I was wondering if you could comment around that piece within the business?

And I guess the second question is, within the international markets, on the consumer, are you seeing any changes to the consumer spending levels in Canada or throughout Europe and any major markets that you might call out?

Yes, Bob. So the -- I just want to make sure I'm clear on the first question. The U.S. full [indiscernible] selling trends, are you saying on what you would consider our ticketed price.

Yes, exactly.

Okay. Well now [indiscernible] extremely strong, which is one reason we've had this strong merchandise margin and the merchants have been able to buy a really extreme value and exciting value. So our full price selling has been really terrific. We call it our -- we sell most items.

I can't give you the numbers, but we sell most at full price, and then we do markdowns and some sub markdowns, but most of what we sell, we sell at the first full price and then most at the first markdown once we go to markdown. And our model has -- we never sell off our end of clearance because we always eventually hit the price where the goods all sell out. And so that's been encouraged. I don't see any change in that because, again, our merchants do a great job in ensuring our out-the-door value is so strong relative to what other retailers are selling it for at their full price even though it's there maybe sale price.

So I think that's built into our model, why we're always providing our customers great value. And internationally, we -- so I've heard there's been a lot of talk of concern fuel prices or whatever on the international markets, and it's been actually written and talked about it more recently over the last week. And we have not experienced that partly there could be the whole market share thing where we're indexing on grabbing more of the market internationally, but our Europe business and Canada business and our Australian business, have all been very healthy.

See it in the comp.

You can see it in our comps in all those geographies. So I would say we might be -- I do hear though, there could be reports of tough international retail business. We are not falling into that fortunately, knock on wood.

The next question is from Corey Tarlowe with Jefferies.

Great. John, I was wondering if you could talk a little bit more about the gross margin performance in the quarter. It's been, I think, a couple of years since you've had gross margin expansion as significant as 200 basis points. So would love to just get a little bit more color there as to what drove that, if possible.

And then I had two other questions. One was just on the Middle East, if there's any impact you could share there. And then thirdly, anything on tariff refunds that you can provide any detail on that would be great.

Yes, sure. So gross margin, I mean, it's pretty straightforward. Obviously, a 6 comp is -- generates margin expansion, merchandise margin through better buying again, the 6 comp helps us leverage our DC expenses. And then we talked about the inventory and fuel hedge in the first quarter.

So that was a piece of it as well. And so yes, we're just very pleased with how the quarter came together. And getting to your next questions. Do you want to answer Middle East [indiscernible] I mean, I can jump to tariffs.

Yes. The Middle East, fortunately, there was a little softness there when the war was closer in, so to speak, but they have actually been performing surprisingly well. And so I would say given the circumstances. And so we're pretty happy with that.

And we're, again, looking at -- we're just full steam ahead on working with them. We put a couple of people in that we think are going to help with the merchandising there. That's what we think one of the places where we will help with that investment and with that total business. And so relatively speaking, given everything going on, we've been actually happy with their performance.

Yes. And then from the tariff front, I mean, we -- so we have submitted for tariff refunds, but our guidance currently does not assume any benefit from any potential refund and nothing more to add on that.

Okay. And then just one quick follow-up. On a fixed comp, also SG&A, I think, delevered about 10 basis points. Curious as to why that was?

Well, again, we came out with our guidance was 40 basis points of deleveraging, and we came in at 10%. So versus our guidance, we definitely saw store efficiencies gain from -- to store efficiencies from our guidance.

The next question in the queue is from Mark Altschwager with Baird.

Wanted to ask on Europe. If you could talk a little bit more about what you're seeing in the consumer there today, if there's any change by market or category as some of the macro uncertainty has picked up. Relatedly, are you seeing the value proposition resonate more in an environment in this environment that could support traffic, or is the consumer just behaving pretty consistently with what you saw exiting the fourth quarter.

No, Mark, good question. I mean, overall, the headline there is we think as -- and as you know, in Europe, for example, some fuel prices, especially in the U.K. be a significant increase even more so than in the States. I do feel there is a bit of a value play there in that they will [ have a date ] certain customer percentage is more open to go into value when maybe they were shopping more the high street as they call it there. So I do think there is a possibility of that has been going on and would continue to go on.

So what the teams do, our teams do is they focus on just like we said before, again, a key differentiator for us is all income levels can feel that over in Europe. And so we want to continue to emphasize that we have good, better, best products across good, better, best brands and various price points from moderate to better to best price points and quality level always consistent. And our store shopping experience that division, they've done an amazing job on that and keeping convenience in the shopping experience so that we can take advantage because even when you're starting to grab maybe some market from customers that haven't been into your store for a bit, and they're coming in because they're looking for the value given the situation that's going on.

We want to ensure that we're capitalizing on that and retaining them for future purchases because if the fuels us -- we look at this as an opportunity if fuel prices do come down at one point, we want to hang on to the customers that maybe we have grabbed in certain situations due to the fuel and due to them being value-conscious. We want them for the long term. So hopefully, that makes sense. But yes, we feel like that could be playing in for a bit.

That does make sense. And if I could follow up once more on merch margin. you outperformed plan. The biggest driver to the expansion was merch margin, which you attributed to better buying. In terms of those tailwinds, the better buying what are you incorporating in your outlook for the remainder of the year?

I guess asked another way, if you perform in line with what you did in Q1 from a buying execution standpoint, would that be upside to your gross margin for the remainder of the year? Or how are you thinking about that?

Yes. Our gross margin -- we -- our forecast contemplates everything we're thinking today as far as our -- the rest of the year gross margin. And again, it wasn't just the merch margin, it was the sales as well, and the expense efficiencies or expense leverage. If we outperform our sales for the remainder for second quarter and back half, then we would expect to see, again, some type of expansion based on our sales growth.

So right now, on a 2% to 3% for the back 9, I mean, the forecast we're giving you is what we're seeing.

And the final question of the day is going to come from Paul Lejuez from Citigroup.

I'm curious what your plan in 1Q from a traffic versus ticket perspective? And maybe if you can talk about the metrics in terms of what you're seeing quarter-to-date, or how you expect them to look in the second quarter? And then second, Ernie, you mentioned each division growing their customer base. I'm curious what is the profile of the new customer at each of the divisions?

How do they look different from your existing customer base? Are you seeing a greater percentage of your customers that are higher income, lower income, younger, older, anything that you could frame the new customers that you're seeing by the division.

John?

Sure. Paul, your first question, are you asking for the second quarter, what we expect the transactions in the basket to be?

I'd love to know that, but the first part of that question was what is your plan first quarter from a traffic [ risk ticket perspective? ]

We didn't it's -- look, it' we just don't -- we don't parse that out, and it's really not significantly important. It's whether it comes from somebody making an extra trip or having a bigger basket, it's just driving the top line, and that's really what we focus on.

Yes, Paul, though, on what you were asking about customer what we're seeing is -- and I kind of alluded to before, but all the TJX brands, we're continuing to attract a disproportionate number of really new Gen Z and millennial shoppers, and that's -- and it's disproportionate from what our current mix or the general population would be, which again, I think, bodes well for us for the future. Not as -- again, our income -- what we like about it hasn't moved as much on the new versus existing, but what we like on our income breakdown with our customer base, is we skew a little higher than the general population, but the key is it's very balanced.

So we are very -- again, it goes back to the good, better, best. What we absolutely love about our customer base from an income perspective is it's very balanced by income groups. So under 50, 50 to 100, over 100, we compare it to the general population. And by the way, we monitor this consistently.

Obviously, I can't give you the numbers. But all I can tell you is, it's a portfolio -- a balanced portfolio that any of us would like to see. If you owned a little store yourself, you'd like to see that you're selling it to all different -- you'd sell the merchandise all different income groups, very proportional. So I hope that helps.

And thank you all for joining us today. We look forward to updating you again on our second quarter earnings call in August. Thank you.

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