T.J. Maxx and Marshalls parent TJX reports better-than-expected fourth-quarter profit and sales. ... [+]
Amazon may be the easy scapegoat for many brick-and-mortar retailers losing customer traffic and shutting stores, but what department stores and a growing number of other retailers need to worry about is right in their own neighborhood: T.J. Maxx and Marshalls parent TJX.
As retailers from Macy’s to Bed Bath & Beyond attempt to reverse declining sales, off-price retailer TJX, which said it sells branded products as much as 60% below full-priced retailers, on Wednesday reported better-than-expected holiday fourth-quarter profit and sales. Comparable sales in the quarter that ended February 1 rose 6%, leading to the company’s 24th straight annual increase in those sales.
TJX’s worldwide sales for the year rose 7% to $41.7 billion, exceeding the $40 billion threshold for the first time. In comparison, Macy’s this week reported its full-year sales fell to $24.6 billion.
TJX credited higher customer traffic—its 22nd straight quarterly increase—as the biggest driver of its sales upside. That’s despite the fact that the average age of its T.J.Maxx and Marshalls stores is 20 years old.
Different from many other retailers, TJX’s fourth-quarter gross margin also widened, helped by fewer discounts, company executives said on a conference call Wednesday.
TJX shares jumped almost 7% to a record high Wednesday.
“We are attracting shoppers of all ages including a significant amount of Gen Z and millennial shoppers,” Ernie Herrman, TJX president and chief executive, said on the call. We see “plenty of opportunities to keep gaining share globally. It’s ripe for the picking.”
Its resonance with shoppers is also growing. Executives said on the call its stores have become a “gift-giving destination” during the holiday season, with customers considering giving gifts in TJX branded bags as “cool.”
As Macy’s and other retailers have reported plans for more store closings, TJX has opened more than 1,100 stores the past five years to over 4,500 as of February 1, with plans to further expand both domestically and internationally in Canada, Europe and Australia.
TJX, which also owns other brands including Sierra and HomeGoods, said it doesn’t have any store exposure in China, where the coronavirus outbreak has hurt local demand for U.S. merchants from Apple to Starbucks. The company said it’s too early to gauge any potential supply chain impact.
“We see a fair amount of store closings in every geography,” Herrman said, adding the retailer has picked up market share in Europe. “Value is critical in those markets.”
TJX has a team of about 1,100 buyers who buy goods from more than 21,000 vendors worldwide. The retailer said it will add more buyers and vendors to create a more “treasure hunt shopping experience,” a model that’s also separated another industry outperformer: Costco.
TJX “has a unique first-mover advantage helping to negotiate exclusives with key brands, which when accompanied with its much more diverse customer base . . . creates an attractive moat relative to other apparel/home based-retailers,” Gordon Haskett analyst Chuck Grom said in a recent report.
Indeed, TJX’s assortment spans from many on-trend apparel and home goods to pet gear, supplements and cleaning supplies, increasingly pitting it against other types of retailers while continuing to give it a leg up when it comes to surprising shoppers.
TJX isn’t the only beneficiary of the growing off-price presence. Collectively, the company and its two smaller rivals Ross Stores and Burlington Stores are expected to open about 2,500 new stores in the coming years, said RBC analyst Kate Fitzsimons in a recent report.
“It appears that the off-price focus on brands, value, and the in-store treasure hunt have resulted in ongoing store traffic and market share gains, particularly as U.S. department stores and specialty retailers continue to cede share,” she wrote, adding off-price retailers’ 15% combined share in North American apparel and accessories market will go even higher.
The frequent long lines observed at TJ Maxx and Marshalls stores, regardless of the time of the day or the season, would likely prove that point right.
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