Home Depot, TJX Buck Retail Trends
August 16 2016 - 5:30PM
Dow Jones News
Not all retailers are in a funk. Americans are still visiting
stores to pick out new kitchen cabinets or hunt down deals on
designer clothes.
On Tuesday, home-improvement chain Home Depot Inc. reported a
4.7% jump in sales at established stores during the second quarter,
while TJX Cos., the parent of T.J. Maxx and other off-price chains,
posted a 4% increase at existing stores. Both companies are
forecasting similar gains for the rest of the year.
Both Home Depot and TJX have enjoyed a much better stretch of
sales than the broader retail market by operating in sectors where
consumers are willing to spend and building models that can blunt
the intrusion of online competitors like Amazon.com Inc. Their
growth has outpaced that of department stores like Macy's Inc.,
which has tabbed more stores for closing, and big-box chains like
Target Corp. and Wal-Mart Stores Inc., which both report later this
week.
Other chains are benefiting as competitors falter. Dick's
Sporting Goods Inc. on Tuesday raised its profit outlook for the
year, as the impact from closeout sales at its bankrupt competitor
Sports Authority Inc. wasn't as bad as feared. "We are definitely
seeing market share coming to us," CEO Ed Stack said. Sales rose
2.8% at existing stores in the second quarter and they are expected
to rise up to 3% for the year.
The latest results show that the consumer, whether helped by
rising wages or feeling flush from their home value rising to near
peak levels, are willing to spend. "The fundamentals for consumers
are good, they're just spending their money differently," said
Carol Tome, Home Depot's finance chief.
TJX says its model, where it buys goods through closeouts and
sells them at discounted prices, is helping win over shoppers. "We
are convinced that we are attracting new customers, driving more
frequent visits to our stores, and gaining market share," CEO Ernie
Herrman told analysts on Tuesday. It also operates the HomeGoods
and Marshalls chains.
Home Depot and rival Lowe's Co.'s, which reports earnings
Wednesday, are both buffeted by the rising housing market, which is
spurring homeowners to take on pricey projects like renovating
bathrooms or replacing roofs. Home Depot on Tuesday said the number
of transactions over $900 rose 8.1% in the period and that the
number of items purchased at a time rose because more ambitious
projects require more tools and parts.
"You're looking at 40, 50, 60, even 70 items in the basket," CEO
Craig Menear said. In the second quarter, Home Depot's profit rose
9.3%, while revenue climbed 6.6% to $26.47 billion. For the full
year, the Atlanta-based company expects same-store sales to rise
6.3%.
Executives at TJX said they expect sales at existing stores to
rise 3% to 4% this year and plan to add hundreds of stores in North
America in coming years. The Framingham, Mass., company's profit
rose 2.3% to $562.2 million in the second quarter, while revenue
rose 7% to $7.88 billion.
But TJX's shares took a hit after its third-quarter outlook
disappointed investors. The company cautioned that higher wages,
investment projects and foreign currency swings would pressure
profits. Shares of TJX, which hit a high Monday, fell 5.5% to
$78.12 on Tuesday.
Suzanne Kapner contributed to this article.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
August 16, 2016 17:15 ET (21:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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