Prevailing wisdom holds that when the economy is shaky and
unemployment high, a rising tide of skittish consumers will
scramble for bargains around every corner.
That's true for some consumers, anyway. Well-heeled folks who
don't have to worry about counting nickels and dimes will still
shop wherever they like, merrily ignoring price tags and discount
bins along the way.
For others, bargain-hunting isn't something that fluctuates
with the economy. It's a way of life. They look to save money
through good times and bad, regardless of whether the economy is
pumped up or passed out.
These are the kinds of customers who have helpedTJX Cos. (
) establish itself as one of the most consistent performers in
the retail world.
TJX operates the T.J. Maxx, Marshalls and HomeGoods chains.
It's the nation's largest off-price retailer of brand-name
apparel and home fashions with 1,006 T.J. Maxx, 892 Marshalls and
393 HomeGoods stores in the U.S. It also has 220 Winners, 87
HomeSense and 12 Marshalls stores in Canada; and 337 T.K. Maxx
and 24 HomeSense stores in Europe.
While many other retailers suffered a slowdown during the
financial crisis and ensuing recession, TJX kept right on
About the worst you could say about its performance is that it
grew annual earnings only 5% and sales only 4% in fiscal year
2009. Since then, annual earnings have grown at least 14%. Only
once since 2008 has the company reported a decline in same-store
"TJX's ability to continue to refresh its merchandise means
they can attract the same customers quarter after quarter, year
after year. They appeal to higher-end-income people who are
looking for high-end brands but at better prices," said Jaime
Katz, an analyst at Morningstar.
TJX sells brand-name and designer merchandise at 20% to 60%
discounts off regular store prices. It can do so because it
typically gets its merchandise about a season late. Fall clothes
that are sold during the summer at department stores likeMacy's (
) are not available at TJX until the fall.
Plenty of consumers are willing to wait a little longer for
such hefty savings, Katz says.
"Even though they are behind the regular retailers, the
merchandise is still in season at TJX," Katz said. "They've done
a good job getting the right merchandise at the right time."
The strategy has helped TJX produce some of the most
consistent financial returns in the retail industry. Outside of
the rare hiccup, the company churns out double-digit earnings
growth with mind-numbing regularity. Same-store sales growth is
usually in the mid- to high-single digits.
"TJX has been consistently reporting increased comparable
store sales for the past several quarters," Zacks Equity Research
noted in a report. "This reflects increased customer traffic and
On July 3, TJX reported a 7% gain in June same-store sales.
That was well ahead of the 4.2% increase expected by Thomson
Reuters analysts. Total revenue climbed 9% to $2.3 billion. TJX
said same-store sales are up 8% year-to-date.
"Transactions continue to be the biggest comp driver (and)
average ticket prices have been trending up slightly," JPMorgan
analyst Brian Tunick noted in a recent report.
The better-than-expected June report prompted TJX to raise its
second-quarter and full-year earnings guidance. It now expects Q2
profit of 52 cents or 53 cents a share vs. earlier guidance of 47
cents to 50 cents. It raised its fiscal 2013 earnings guidance to
a range of $2.31 to $2.39 from earlier guidance of $2.27 to
"We are encouraged by the company's flexible off-price
business model that allows it to react according to market
trends," Zack's noted. "TJX has a low-cost structure compared to
many other traditional retailers."
Last quarter, TJX posted earnings of 55 cents a share, up 41%
from the prior year and a penny above consensus views. Revenue
climbed 11% to $5.8 billion, slightly ahead of estimates.
Same-store sales climbed 8%.
Meanwhile, TJX's stock price continues the steady climb that
began three-and-a-half years ago. Shares touched a record high of
45.39 July 17. The stock is up nearly 40% since the beginning of
TJX competes in a pretty thin field when it comes to large
chains that offer discount prices on quality name-brand
Its main competition comes fromRoss Stores (
), which operates about 1,500 Ross Dress For Less stores. Like
TJX, Ross pumps out double-digit earnings growth with regularity
and continues to see its stock price set new highs.
The rest of the field is largely made up of smaller regional
"Ross and TJX are really the only players at this scale who
can lever vendor relationships to get merchandise at good
prices," Katz said.
She expects TJX to keep getting bigger in coming years. The
company has about 1,900 T.J. Maxx and Marshalls stores in the
U.S. Katz reckons that number can grow to around 2,300. She also
sees the HomeGoods chain growing to 750 locations in the U.S.
"TJX Canada probably has 30% growth left, and the operation in
Europe can pretty much double," Katz said. "TJX is still very
much a growth story."