TJ Maxx is benefiting from other retailers’ bankruptcies.
The retailer’s sweet spot is meeting a consumer need for discounted brand products while helping vendors offload unwanted merchandise. As more retailers fold, including Payless ShoeSource and Gymboree, their vendors are reaching out to TJ Maxx to offload unwanted inventory, enhancing the retailer’s product selection, CEO Ernie Herman told investors Wednesday.
“When we look at our value positioning in terms of how well we’re able to execute, we’re so well positioned in our ability to execute brand, fashion, quality and at the value pricing,” he said. “Whenever [bankruptcies] happen, we end up with some of those vendors that supply them reaching out to us.” Customer traffic was the primary driver of sales, and the company is gaining market share, he added.
The company reported 6 percent growth in same-store sales for its fourth quarter of 2018, a 4 percent jump year over year, while fourth-quarter net sales were valued at $11.1 billion. Its store count, at more than 4,300 stores, keeps growing.
TJ Maxx has benefited by being a contrast to e-commerce capability. Customers can easily find and shop whatever they need online, but in a TJ Maxx store, they’ll rifle through discounted products for goods they otherwise wouldn’t be able to find, said Gartner L2 director of client strategy and research Tom Gehani.
“Compared to third-party marketplaces, where you can find any product anywhere, off-price has been this beacon of scarcity,” he said.
Though the retailer faced some margin pressure (its profit margin for the fourth quarter was 10.6 percent versus 10.1 for the same prior year), strains the company attributes to additional freight and labor costs, it’s part and parcel of being a discount retailer whose core activity is to move inventory quickly. While TJ Maxx’s store network, which currently stands at 4,306 locations, keeps growing (it added 236 stores globally over the past year, including 29 new stores in the U.S.), the question over time, said Nomura retail analyst Simeon Siegel, is how big it is able to grow.
“I am confident in their sustainability, but how large can they get?” said Siegel. “You’re picking up the mistakes [of brands and retailers]; someone is making the initial bet — no one grows forever.”
He added that off-price retail is increasingly becoming a destination for shoppers; but having its success pinned on supply availability from full-price retail channels isn’t a certainty over the longer term. Meanwhile, large chains like Target, Walmart and Home Depot are investing in tech-enabled experiences in-store, including online order pickup, cashierless checkout, and VR/AR technology, while growing their online stores. While TJ Maxx has a “click and collect” service in its U.K. stores, it’s not yet available in the U.S.
How long TJ Maxx can continue to keep e-commerce as a secondary experience to in-store shopping is unclear. According to data from Nomura, e-commerce represented 1 percent of sales across the company’s brands. The company is growing its e-commerce offerings, including a planned launch of a Marshalls’ e-commerce portal later this year, but Herman told investors that the inventory online is deliberately not the same as what’s available in stores. Hence, the best “gems” of the treasure hunt are only available to in-store shoppers. That’s a compelling model, but whether or not that formula is viable over time is an open question, said eMarketer retail and e-commerce analyst Andrew Lipsman.
“They’re more justified than taking that approach compared to other retailers, but, as a long-term proposition, 20 percent of apparel sales are happening online, and that’s a big segment of the market you’re saying no to.”
More in Marketing
How brands like Coach are tackling the metaverse opportunity: Is This The Metaverse? Podcast, episode 4
In episode four of the “Is This The Metaverse?” narrative podcast, Glossy international fashion reporter Zofia Zwiegliska spotlights the brand opportunity when it comes to fashion in the metaverse.
Marketing Briefing: As influencer marketing grows up, vetting gets more serious for creator partnerships
Overall there’s more due diligence from marketers when it comes to influencer marketing efforts now, according to marketers and agency execs, who say that there’s been more rigor over the last year, and especially over the last six months.
The collaboration between the Los Angeles Rams and Snapchat goes back to 2020 as the Rams made became the first NFL team to conceive a Snapchat AR experience, affording fans the opportunity to virtually wear the team’s recently unveiled uniform.