Off-Price Is Still Taking Market Share from Department Stores — the Proof Is in TJX’s Latest Quarter

Even in a strong economy, it seems that shoppers can’t resist a good deal.

TJX Cos., the parent company of T.J. Maxx, Marshalls and HomeGoods, said its comparable-store sales were up 6 percent in the quarter ended Feb. 2, demonstrating the strength of the off-price sector during the holiday season.

Full-price competitors, by comparison, have so far posted more modest gains: Macy’s same-stores sales, for one, rose 0.7 percent for the quarter on an owned-plus-licensed basis, and the retailer said it expects sales growth to be flat to up to 1 percent for fiscal 2019. Nordstrom reports fourth-quarter and full-year 2018 results on Thursday after market close but said its off-price sales rose 3.9 percent during the holiday season, compared with 0.3 percent growth in full-price.

TJX CEO and president Ernie Herrman credited the upbeat results to stronger customer traffic at every division, and said he’s confident in the company’s projections for the coming year. For fiscal 2020, TJX expects comparable-store sales growth of 2 percent to 3 percent on a consolidated basis, and 3 percent to 4 percent at T.J. Maxx and Marshalls.

“Almost universally across all the divisions, we have an enormous penetration and growth rate on key branded vendors and branded merchandise,” Herrman said on a call with investors and analysts, adding: “Each division has had a significant increase in their top brands … and in aggregate, our top brands are up pretty significantly across the board.”

He outlined the company’s e-commerce strategy, which differs significantly from many of its competitors (the channel still accounts for a relatively small share of sales). “A high percentage of our mix is differentiated from online versus what’s in the stores, and we find that that is the No. 1 reason that we can get an incremental build off the business and not have cannibalization or lose visits to the store,” he said. Like many retailers, TJX wants to encourage shoppers to use physical stores as well as shipping for returns.

Herrman said TJX enjoys “stability in merchants across the four core divisions” because its business remains so beneficial to brands. “The name of the game here is value, and when we look at our value positioning in terms of how well we can execute going forward … we are so well-positioned in our ability to execute brand fashion quality at value pricing.”

TJX expects earnings for fiscal 2020 to be between $2.55 and $2.60 a share, up from $2.43 in the year ended Feb. 2. Net sales for the fourth quarter rose 2 percent year over year to $11.1 billion, while net income fell to $841.5 million, from $877.3 million last year.

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