December 5, 2011
High-end retailers are off to a strong holiday season judging by November 2011 same store sales. Sales at Saks were up 9.3 percent, and Nordstrom’s sales increased by 5.6 percent, for example. According to the International Council of Shopping Centers, sales at luxury stores open at least a year will climb 7.5 percent in November and December, up from the 6.7 percent increase realized last year. On the other end of the spectrum, deep discounters are also doing well. For example, Dollar General reported same store sales increased by 6.3 percent for the third quarter, up from 4.2 percent during the same period last year. They look for same store sales to increase by 5.0 percent during the fourth quarter holiday season.
Compare these results to a recent survey of 20 large retailers tracked by Thomson Reuters, which found that sales rose by 3.1 percent in November over a year ago, and you get the idea how well retailers serving both the well-to-do and penny-pinching consumers are doing (see Chart 1).
Chart 1. Thomson Reuters Same Store Sales (monthly change vs. 12 months prior)
This data, plus a recent phone call from a well-respected analyst and journalist, got me thinking about how well specialty retailer TJX Companies (T.J. Maxx, Marshalls, etc.), the country’s largest off-price retailer of branded apparel and home goods, is holding up. Not a department store (i.e., JC Penney/Kohl’s), and certainly not a full-price apparel retailer (i.e., Gap/Limited Brands), TJX occupies a unique niche of selling brand name merchandise for 20-60 percent less than department stores (more comparable to Ross Stores and the now bankrupt Syms).
TJX is successfully selling discretionary goods in a tight economy by selling high quality brands at low prices. November same store sales were up 4 percent versus last year. Same store sales increased 3 percent for the third quarter versus a 1 percent increase in the same period last year, and increased by 3 percent for the previous nine months versus a 4 percent increase during the same period last year. Sales increased 5 percent for the third quarter 2011, and 6 percent for the nine-month period over last year’s comparable periods (see Chart 2). Its stock price indicates that the market recognizes the retailer’s success (see Chart 3).
Chart 2. TJX Quarterly Sales
Source: Market Edge Research
Chart 3. TJX Stock Price
Source: Fidelity Investments
In thinking about this retailer’s position, I thought feedback from its customers would be instructive. The comments, pulled from various social media sites, generally were very positive including, for example, the following:
“I love this TJ Maxx, especially the designers section. They have lots of Alice + Olivia which is awesome and I've even seen Versace! Awesome, awesome TJ MAXX!”
“I love this place; there men's line is nice and my kind of style for my husband.”
“When they say home goods they freaking mean HOME GOODS. As in the most awesome decor for your HOME!!! It’s amazing in there.”
“My girlfriend and I found some killer deals on a few things here. They have a great selection of home goods and really low prices like pillows, bed sheets, and funky decor.”
“For you women out there you can get designer brands in the jewelry department. I saw a Gucci and Movado watch for 70 percent off. A hot mess of stuff, but some great values."
“Everyone likes shopping at the store for the most part. Some of the stuff they carry is very high end for the prices.”
“What can I say? Low prices for name brands =).”
Of course I found some negative comments about TJX as well. But most of these were related to long checkout lines and disinterested sales associates (sounds like Walmart).
High inventory levels at their distribution centers, potential constraints on domestic growth opportunities, misguided overseas expansion, a need to make major investments in their merchandising and supply chain systems and a new data center, as well as a non-existent e-commerce presence are valid concerns facing TJX. But when considering the company, keep in mind that its customers like the store, and its top line revenue reflects this. And with Syms in liquidation, they may even pick up some new customers.
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