Analysis: TJX stands ‘head and shoulders’ above most other off-pricers
After a dismal set of results from many clothing retailers over the holiday period, some may be wondering whether consumers were buying much apparel at all. TJX has answered that question with its strong results: Shoppers were out buying, but they were doing so in off-price rather than in mainstream retail.
Admittedly, TJX’s strong sales uplift of 9.7% comes off the back of a weaker result last year, but it is nonetheless impressive and demonstrates that the company remains a destination for apparel and homewares across many consumer segments. Indeed, our data show that over the holiday period, TJX was firmly in tune with the shopper mindset which was demanding value for money, interesting assortments, and quick inexpensive fashion fixes. As a result, footfall rose strongly – and included a solid uplift from consumers who do not regularly shop off-price.
Such growth came against a much more promotional backdrop when many retailers were using discounts and offers to stimulate sales. Theoretically, this gives the consumer greater ability to shop around and to snag a bargain. In practice, however, much of the discounting continues to occur at the weaker retailers which consumers are not inspired to visit and is applied to merchandise that has been badly selected by buying offices and is therefore unappealing to consumers. That TJX can trade successfully against an onslaught of discounting bodes well for 2020 when we believe that promotions will become more widespread and deeper.
Within the U.S., the TJMaxx and Marshalls division posted a comparable uplift of 6%. From our channel checks, the merchandise at both TJMaxx and Marshalls was superior to that of rivals and contained far more must-have brands and items that could be worn for parties and events over the holiday season. This strong assortment helped to drive sales among consumers who were buying gifts and making self-purchases.
The HomeGoods business also had a good quarter with a comparable uplift of 5%. This is an advancement on performance across the rest of 2019 and demonstrates the importance of holiday décor to the business. As we have noted before, one of the issues with HomeGoods is the relatively static nature of the offer which deters repeat visits and buying. However, this applies less to the holiday season when HomeGoods pulls out all the stops for decorations and festive accessories and benefits from increased footfall and conversion as a result. Going forward, the trick is to inject more newness into the assortment between seasons.
Overseas results were also strong with the international division, excluding Canada, posting a 10% uplift in comparable sales. Some economic and consumer uncertainty in Europe helped to create a more conscious mindset among shoppers who switched to off-price to save money over the holidays. We believe that these trends are set to continue across most of 2020 which should be broadly beneficial for TJX.
On the bottom line, TJX continues to deliver with a 17% uplift in net income over the prior year. This was largely thanks to the underlying improvements in productivity and careful cost management.
Looking ahead, we remain positive about TJX. While the competitive environment is intensifying in off-price, TJX stands head and shoulders above most other players. This, and a consumer mindset that remains predisposed to saving money, bodes well.