The divide between winning and losing retailers has become stark in 2017. TJX, which posted first-quarter results on Tuesday, is clearly on the winning side.
In a quarter that has seen declining comparable sales at big department stores, and yet another apparel retailer, rue21, becoming the latest to seek bankruptcy protection, TJX CEO Ernie Herrman reiterated the company's long-term global potential to open 5,600 stores, up more than two-fifths from nearly 3,900 stores currently.
What’s more noteworthy, in the company’s largest and home market, the US, TJX still sees room to open more T.J. Maxx and Marshalls stores to a total of 3,000, up more than a third from 2,230 at the end of fiscal Q1. For its HomeGoods unit in the US, it also sees room to increase the store count by two-thirds to 1,000 stores from nearly 600.
We have “tremendous opportunity to gain additional market share,” Herrman said on a call Tuesday. “When many other retailers are closing stores, we are at a great position to be opportunistic to take advantage of the great deals available.”
Herrman also explicitly called out the company’s international stance, calling TJX “a global sourcing machine.” TJX has buying team that numbers more than 1,000, working with some 18,000 vendors in over 100 countries.
The company doesn’t take goods just when there are department store cancellations or when a manufacturer makes too many products it needs to get rid of. It tracks consumer tastes and has products specifically made for it, whether blown glass from Poland or cashmere clothing from Italy.
TJX’s 1% Q1 comparable sales gain fell short of expectations (the company blamed “unfavorable” weather in the US that hurt spring merchandise demand), but Herrman said demand picked up as the quarter progressed and weather turned warmer. The company’s two biggest chains, T.J. Maxx and Marshalls, contributed 64% of its total sales in the quarter."TJX doesn’t have the same problems as the rest of retail"
“TJX doesn’t have the same problems as the rest of retail,” said Cowen & Co. analyst Olive Chen in a note, adding its strengths include the global buying team and relationships and growing vendor dependence on the “increasingly more attractive” off-price model. “We also view TJX as Un-Amazon-Able given that customers engage in an in-store treasure hunt. Many brands have preferences to not be online, and average ticket and prices are sufficiently low relative to shipping costs of $5 or more.”
(At a time when free shipping offers are all but imperative for most retailers selling online, TJX, which said its products are usually priced 20% to 60% below department store and specialty retail’s regular prices on comparable merchandise, charges $8.99 on standard shipping of purchases up to $74.99 at TJMaxx.com.)
To be sure, Amazon’s growing fashion ambition and TJX’s relatively low online sales, which industry watchers have estimated still only make up a low single-digit percentage of sales, is a worry for some.