TJX Companies (NYSE:TJX)
Historical Stock Chart
1 Year : From Mar 2019 to Mar 2020
By Suzanne Kapner
Americans are more value-conscious than they have been in decades. And retailers offering good deals, from bargains on brand-name goods to conveniences such as free shipping, are gaining share at the expense of peers that have been slow to innovate.
Walmart Inc., Target Corp. and T.J. Maxx parent TJX Cos. reported strong sales growth and an uptick in visitors to their stores. But Macy's Inc., J.C. Penney Co. and Nordstrom Inc. are among retailers that continue to struggle.
"The common thread among retailers that are doing well is that they offer some type of value," said Chuck Grom, senior analyst at Gordon Haskett Retail Advisors. "But, today, value is about more than just price. It's also about convenience."
Convenience can take many forms. It can mean pulling into a Walmart or T.J. Maxx parking lot and dashing into the store rather than navigating through a shopping mall maze. It can also mean free, two-day shipping, no minimum required, as Target offered last holiday season.
On Wednesday, Target said sales at stores open at least a year rose 3.4% for the three months ended Aug. 3, and upped its earnings guidance for the current fiscal year.
Total revenue for the recent period increased 3.6% to $18.4 billion. Net earnings climbed to $938 million from $799 million a year earlier.
A day earlier, TJX said sales at stores open at least a year rose 2% in the most recent quarter, which was lower than some analysts had expected, but on top of a 6% increase in the same period a year ago. TJX CEO Ernie Herrman told analysts that customer traffic to its stores drove the sales increase and that foot traffic had grown for 20 consecutive quarters.
TJX stores rapidly turn over limited quantities of goods at bargain prices. The result is a constant treasure hunt, with shoppers coming back to ferret out deals. There is no glut of stock in the backroom. Customers know if they don't buy it today, the item might not be there tomorrow.
Kohl's, on the other hand, is suffering a similar fate to other department stores even though it isn't located in malls and has introduced services designed to draw shoppers to its stores. Under a partnership with Amazon.com Inc., customers can return items bought on Amazon to any of Kohl's more than 1,100 locations.
Nevertheless, Kohl's sales fell for the third consecutive quarter in the most recent period, leaving it with excess merchandise that it had to mark down, hurting profits.
More than a decade after the last recession, consumers still remain "extremely focused on getting value for the dollar," said Neil Saunders, a managing director of GlobalData PLC, a research firm. "A lot of retailers haven't added that value, and consumers are just going elsewhere."
The poor results from some chains can't be blamed on fears of an oncoming recession. In July, retail sales increased at their strongest level since March, giving the economy a boost.
"The consumer is still healthy," Macy's CEO Jeff Gennette said in an interview last week.
Many other factors are upending traditional retailers, from the rise in online shopping to higher rent. They also have to contend with tariffs on goods imported from China and rising labor costs, which have been eating into profits. Some chains are adapting better than others.
Consumers' love affair with a good deal is also manifesting itself in the rise of thrift shopping, which is poised to overtake fast fashion in terms of annual sales within a decade.
"If off-price chains like T.J. Maxx wooed shoppers with promises of 20% to 60% off regular retail prices, resale websites like thredUP offer discounts of as much as 90% off," said Oliver Chen, an analyst at Cowen & Co. "That is making it harder for traditional retailers."
Macy's and Penney are jumping into the secondhand market. Both announced partnerships last week with thredUP Inc. to sell used clothing and accessories in some of their stores. Macy's has also gotten into the off-price game by opening Macy's Backstage discount stores, which compete with T.J. Maxx.
Department stores have been disproportionately hurt, because their stores are in malls that are drawing less foot traffic, as shoppers buy more online. Unlike Walmart and Target, which have large grocery offerings to draw shoppers, department stores are overly dependent on apparel that can be found almost everywhere, making it easy for shoppers to compare prices online.
Macy's last week lowered its full-year earnings outlook after it missed profit expectations, sending shares tumbling, while Penney said sales at stores open at least a year fell 9%.
Analysts say these stores aren't doing enough to adapt to the changes in consumer behavior.
"They are jumping on someone else's bandwagon, rather than innovating," Mr. Saunders, of GlobalData, said. "They are playing catch-up, and that's not good enough in retailing today."
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
August 21, 2019 07:15 ET (11:15 GMT)
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