TJX Companies (NYSE:TJX)
Historical Stock Chart
1 Year : From Apr 2019 to Apr 2020
By Suzanne Kapner
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 22, 2019).
Retailers offering deals, from bargains on brand-name goods to conveniences such as free shipping, are snaring customers at the expense of chains that have been slow to innovate.
Walmart Inc., Target Corp. and T.J. Maxx parent TJX Cos. have reported strong sales growth and an uptick in visitors to their stores. Macy's Inc., J.C. Penney Co., Nordstrom Inc. and other middle-market chains 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 directly into the store, rather than navigating a shopping mall maze. It can also mean free two-day shipping, no minimum purchase required, as Target offered last holiday season.
On Wednesday, Target said sales at its stores open at least a year rose 3.4% for the three months ended Aug. 3, and it raised its guidance for full-year earnings. Total revenue for the recent period increased 3.6% to $18.4 billion. Profit climbed to $938 million from $799 million a year earlier.
Target's shares soared 20% to close at $103, their largest single-day gain on record.
Home-improvement retailer Lowe's Co. also reported higher sales and earnings on Wednesday, though some of the profit increase came from cost cutting.
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 a year earlier. TJX Chief Executive Ernie Herrman told analysts that customer traffic to its stores -- growing for 20 consecutive quarters -- drove the sales increase.
TJX stores rapidly turn over limited quantities of goods at bargain prices. The result is a constant treasure hunt as shoppers come 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.
Nordstrom, on the other hand, is suffering along with other department stores as shoppers make fewer visits to malls and buy more online. Also, unlike Walmart and Target, department stores don't have large grocery offerings to prompt frequent visits.
Nordstrom said on Wednesday that second-quarter net sales fell 5.1% to $3.78 billion. Profit fell to $141 million, from $162 million in the year-earlier period, and the company lowered earnings guidance for the full fiscal year.
Nordstrom's second-quarter profit beat analysts' estimates. In after-hours trading, the stock gained 12%.
Kohl's Corp. is struggling even though it has tried to boost traffic by adding services. Under a partnership with Amazon.com Inc., shoppers can return items bought on the e-commerce site to any of Kohl's more than 1,100 locations. Nevertheless, the retailer'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 profit.
Illustrating the retail divide, Kohl's shares have fallen 41% over the past 12 months, while Walmart's stock is up 17%.
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."
Even some higher-end brands are performing poorly, including Michael Kors and Kate Spade, both of which reported a drop in same-store sales in their most recent quarter.
They can't blame weak consumer spending and fears of a possible recession. In July, retail sales increased at their strongest pace since March, giving the economy a boost.
"The consumer is still healthy," Macy's CEO Jeff Gennette said in an interview last week.
Other factors are upending traditional retailers, from higher rent and labor costs to the rise in online shopping. Department stores in particular are heavily dependent on apparel that can be found almost everywhere, making it easy for shoppers to compare prices online.
Retailers also have to contend with the Trump administration's tariffs on goods imported from China, which are pressuring profits.
Consumers' love affair with a good deal is evident in the rise of thrift shopping, which is on track to overtake sales of fast fashion at the likes of Zara and H&M 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 unveiled 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.
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 22, 2019 02:47 ET (06:47 GMT)
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