TJX conquers holiday challenges

Today’s results from TJX indicate the company successfully overcame the various obstacles to growth that tripped up so many other retailers during the holiday period.

Off the back of a strong comparative from last year, TJX posted an 8 per cent uplift in total sales and a 6 per cent rise in underlying comparables. Notably, both sales measures saw a sequential improvement over the prior quarter.

[The US’ largest  international apparel and home fashions off-price department store chain, TJX evolved from the Zayre department store chain, which later morphed into T.J.Maxx before being renamed TJX.]

This impressive performance was achieved in spite of some headwinds that could well have blown TJX off course. Foremost among these was the warmer weather which softened demand for apparel. One of the reasons that TJX appeared to be somewhat immune to this is the nature of its offer, which is focused as much on wants as it is on needs. As we saw with some of the luxury players, consumers were still willing to buy winter apparel that they liked and wanted; it was the everyday purchases borne out of necessity that they shunned.

Another challenge for some retailers was that of trying to entice shoppers into stores. Across many parts of the holiday period customer traffic was down on prior years as consumers opted to stay home or undertake activities other than shopping. As TJX’s own numbers testify, it was not one of those that struggled. In our view the reason for this is simple: TJX gives customers a reason to visit stores in a way that so many other players don’t. The constantly changing assortment, the excitement of finding a bargain, and the sense of urgency associated with having to secure a product before it is sold out, all give consumers a reason to regularly visit shops.

TJX’s marketing over the holiday season chimed with prevailing customer attitudes, and so helped generate custom for the brand. Rather than focus on products and price, adverts focused on traditional values of family, friends and spending time together under the strapline of ‘Bring Back the Holidays’. This was underpinned by the company’s decision to keep its doors shut on Thanksgiving, so that colleagues could spend time with their families. While it is important not to overstate the impact of this, we believe that TJX’s approach resonated with many shoppers in a way that other retailer’s campaigns did not.

As TJX enters its new fiscal year we expect growth to continue. Despite a more competitive environment, TJX more than holds its own against other off-price retailers and spin-off discount formats from players like Macy’s. As such, it is in good shape to expand its business further. Within the US the long term target is for a store fleet of around 3000 across all fascia. Outside of North America, the company has significant scope for growth in its existing European markets as well as by entering new geographies.

Meanwhile the relatively new opportunity in Australia will provide another stream of growth. Given the efficiency of its operating model, such additions will enhance earnings growth over both the medium and long term.

  • Neil Saunders is CEO of retail analyst Conlumino.


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