While the coronavirus pandemic has largely resulted in subdued sales for most retailers with a strong brick and mortar presence, TJX, the parent company of brands such as T.J. Maxx, Marshalls, HomeGoods, Sierra and Homesense, is seemingly defying market expectations.
Despite having to close its 470 stores temporarily, the company delivered a stronger than expected performance, beating both analysts’ expectations and its own. The company’s net income rose 4.6 percent, reaching $866 million in Q3, up from $828 million a year ago. Meanwhile, the company saw its total inventory decline from $6.3 billion a year ago to $5 billion in Q3 this year. This was largely a result of planning, stronger than expected sales and challenges with the company’s supply chain during the pandemic. Overall, store comps (excluding shuttered locations and eCommerce) fell by 5 percent and pre-tax margins fell 0.7 percentage points, reaching 10 percent.
The company benefited from an increase in demand for home improvement products, with a significant share of consumers continuing to spend more time at home. The company saw store comps at HomeGoods rise by 15 percent.
TJX also announced plans to roll out an online store for HomeGoods in late 2021, which marks a departure from its sales strategy that was built around offering a treasure hunt-like experience to its customers, according to Retail Dive. Some of the brand’s off-price competitors, such as Burlington and Ross, have reportedly avoided an eCommerce presence citing challenges with logistics and thin profit margins.
It is worth noting that while TJX is benefitting from an increase in demand in the home improvement category, it is seeing a decline in apparel sales, which is an important segment for TJX brands such as Marshalls and TJMaxx.
“There have been some better performances in segments such as beauty, athletic wear, and homewares — but as these are smaller elements of the product mix at most Marshalls and TJMaxx stores they have not been sufficient to offset the declines in core apparel lines,” said GlobalData Retail’s Managing Director Neil Saunders.
That being said, a coronavirus vaccine on the horizon is a good sign for TJX as the company is well-positioned to capture the customer base of retailers of other off-price retailers such as Stein Mart, which have gone bankrupt or have reduced their brick and mortar footprint, Saunder pointed out.