iStock.com/JHVEPhoto
May 27, 2024
Can TJX Get a Lot Bigger?
The TJX Companies Inc. earned some headlines last week for telling the investment community it still sees the potential to open “1,300-plus” stores with its current banners in existing countries.
John Klinger, EVP and CFO, said on its first-quarter analyst call, “We still see ability to grow our store base in the U.S. and Canada. And in Europe, also…particularly in Germany.”
At the close of the first quarter, TJX had 4,972 stores, including 3,601 TJ Maxx, Marshalls, HomeGoods, Homesense, and Sierra banners in the U.S.; 567 Winners, HomeSense, and Marshalls units in Canada; 722 TK Maxx and Homesense locations in Europe; and 82 TK Maxx in Australia.
Ernie Herrman, TJX’s CEO, said on the call, “Our off-price business model is extremely flexible and resilient and I believe we are set up for a long runway of exciting growth in our geographies around the world.”
He said TJX’s treasure hunt experience continues to broaden its appeal across income and age groups. He said, “We continue to attract new Gen Z and millennial shoppers to our stores, which we believe bodes well for our future growth.”
Herrman also wasn’t concerned about losing market share to discounters from China, SHEIN, and Temu. He said both are “so commodity-driven” and TJX’s “good, better, best” branded merchandise mix remains a key differentiator. He said, “I could see that their business model could overlap with some other brick-and-mortar guys or some other online guys for sure. But we just don’t see that as bumping up with our customer base or end use.”
Finally, he said that with its more than 1,300 global buyers and over 21,000 vendors in more than 100 countries, TJX has “plenty of quality branded merchandise” available in the marketplace to support growth targets. He said, “Throughout our history, availability of inventory has never been an issue. In fact, in recent years, we have seen availability become even better as vendors look for additional ways to grow their businesses. We’ve opened thousands of new vendors, which keeps our store assortment fresh.”
This year, TJX plans to add 111 in the U.S. and 30 overseas.
TJX’s major competitors also recently outlined ambitious expansion ambitions.
In March, Ross Stores said it remains confident that it can grow its flagship Ross banner to 2,900 locations and dd’s DISCOUNTS to 700 locations “given consumers’ ongoing focus on value and convenience.” At the close of the year, it operated 1,764 Ross stores in 43 states, largely in the western half of the country, and 345 dd’s DISCOUNTS stores in 22 states.
Last November, Burlington Stores announced plans to open 500 stores within five years. The focus will be on smaller, 25,000-square-foot locations in high-traffic strip malls while strategically repositioning or downsizing older, oversized, and less productive locations. Burlington ended the year with 1007 stores in 46 states.
For the current year, Ross plans to open 90 stores; and Burlington, 100. TJX and Ross are on track for continued growth.
Officials at Ross and Burlington have been similarly enthusiastic about off-price’s long-term potential.
“This is my third decade in off-price retail,” said Michael O’Sullivan, Burlington’s CEO, last November. “And as long as I’ve been in the industry, there have always been some commentators who are worried that off-price is going to run out of market share or run out of supply or that it will be eclipsed by some new innovative business model or perhaps some new technology. Now of course, it’s important that we always be alert to those kinds of structural risks, but I have to say that I’m extremely skeptical. I see nothing out there that seriously threatens the long-term growth of off-price.”
Discussion Questions
Do you see robust expansion potential for TJX as well as for Ross Stores and Burlington Stores?
Is the biggest risk to off-price retail’s growth its overall appeal, access to enough clearance merchandise, competition against each other or emerging discounters, or another factor?
Poll
Loading …BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
Recent Discussions
More Discussions
How Can Retailers Crack the Gen Z ‘Riddle’?
Gen Z is becoming an increasingly important consumer demographic, but an elusive one to map. How…Does Bath & Body Works’ Scented Holiday Campaign Pass the Sniff Test?
Bath & Body Works is kicking off a new campaign with scent being at the fore…Which Tech Will Solve In-Store Inventory Woes?
Three major tech lineups are looking to solve retail inventory problems. Which is most suited?
In apparel, TJMaxx and Marshalls have a combined 4.8% share of the US market. This makes them the leading apparel player – well above Target and the department stores, and a shade above Walmart. Is there potential to expand this? Yes, but the gains will be somewhat marginal: based on pulling in a few more customers and selective store openings. The opportunity in the US is mostly in home, where HomeGood and HomeSense have more headroom for expansion; and from Sierra, which is a great concept, but very small. Outside of the US there is bags of room for growth in Europe, Australia and, to a certain extent, Canada. All in all, the company reckons it has scope to open 1,300 more stores around the world. So, yes, TJX can get bigger – but the vectors and makeup of growth will change.
Europe is where most of the growth will come from, I believe. Especially Germany, and the Netherlands.
Yes, it is a good expansion plan for TJX to open additional stores. TJX’s off-price model is popular, attracting a wide range of customers, including younger generations. The company has strong vendor relationships, ensuring a steady inventory of quality merchandise. Expanding stores in the U.S., Canada, and Europe, particularly in Germany, aligns with market demand and growth potential. TJX should not be worried about competition from online discounters like SHEIN and Temu, thanks to its unique merchandise mix. However, the retailer must be aware of the risk to off-price retail’s growth relative to access to enough clearance merchandise.
Access to enough clearence merchandise? Do what the “outlets” do and produce their own.
Today’s topic offers a tutorial on how to comment intelligently: parse the language, and look for chances where the bets might go wrong. First, if you’re naturally conservative, this is neither a “lot bigger” nor “robust expansion”, it’s normal, healthy growth. Second, concede the obvious: TJX’s staff know more about off-price retail than most of us, and more about the company’s capabilities than all of us; so the dangers lie in the parts they can’t really know: the ultimate size of off-price, and whether/not competitors will do better. Mr. Sullivan’s answer to the former is that doubters have heretofore been wrong…and therefore they will continue to be so. It’s a thoughtful guess, but still a guess (albeit likely a very educated one). The second point is who you like the most. I’ll offer no odds here: TJX is a capable company, as likely to win as anyone else…and as likely to lose.
Bank of America analysts say that even if thousands of retail stores close over the next five years, which is likely, it will not be off-price stores, and especially not stores run by TJX.
TJX will grow because of store closures, Macey’s for example. TJX’s newer banners like Sierra and HomeSense are bound for growth. European analysts see brick and mortar regaining market share against ecommerce especially in favor of off-price stores.
To me that makes a lot of sense because the off-price shopping experience is not easily duplicated on-line. Db
I’ll never forget shopping in my local TJ Maxx and realizing that the woman to my right was the sister of then-President George W. Bush. TJX stores have universal appeal, great merchandising, and compelling pricing. TJX is constrained only by its imagination.
It makes sense in the current economic environment that off-price retailers have growth potential, while traditional retailers, especially department stores, are struggling. Consumers have reduced discretionary spending over the past couple of quarters, and this will continue for the foreseeable future – thus discount retailers and highly promotional retail will be the winners. Even when the economy improves, discounters do not have to worry about finding enough inventory to fill out their assortments.
As Burlington’s CEO says and I agree, “I see nothing out there that seriously threatens the long-term growth of off-price.” Not only has the appetite for off-price remained strong in North America, but the treasure hunt model travels well internationally, which creates new growth opportunities for TJX and others. The risk factors to off-price’s growth haven’t changed much, with access to quality merchandise at the heart of their model. But the strong results these off-price retailers and especially TJX have consistently delivered, suggest that this model has plenty of room to grow domestically and internationally.
The TJ Maxx companies are successful businesses. I am inclined to bet on competent management that knows what it is doing.
The opportunity for TJ Maxx Companies sings in Europe. The challenge here will be to identify off-price customers. Off-price isn’t as organized in Europe as in the U.S. Shopping for the lesser prices seems to focus on street markets rather than stores.
Agree, Europe cannot be overlooked because it’s where most of the growth will be. TJM is in Germany, Poland, Austria and the Netherlands.
Primark is very well developed in Europe and most supermarkets in European countries have very strong value-focused apparel offers, so competition is a bit stiffer. The big difference is that the European consumer mentality is more driven by low prices in apparel. The US mentality likes low prices but loves discounts and deals – which chimes with what off-price players specialize in.
Here’s a jaw dropping statement. “Throughout our history, availability of inventory has never been an issue. In fact, in recent years, we have seen availability become even better as vendors look for additional ways to grow their businesses. We’ve opened thousands of new vendors, which keeps our store assortment fresh.” There’s no turning back the clock on this scenario now. The horse left the barn a couple of decades ago. I would have thought that department stores and vendors would have at least wanted to deny the off-pricers robust growth.
I keep wondering when retailers and brands are going to figure out that having an off-pricer as the leading apparel player is probably not the healthiest of scenarios. Seems like retailers and brands have two choices. Get even more down and dirty in their pricing and promotions…or…clean up their act, stop over-buying, and provide the necessary distinction and differentiation to sustain a regular price business. (Understanding that “regular price” doesn’t mean what it used to.)
I like a treasure hunt and a deal as much as the next customer. But retailers and brands keep feeding the beast that is eating their very soul. And the off-pricers are eroding the layer of the business that makes them off-pricers. But hey, growth is the most important thing, so let’s just keep rolling along. It’s all good.
Print-to-order and eventually weave-to-order models offer upscale brands and retailers the opportunity to focus on product quality, which will mean completely accurate fits + durability / ease of care + regional design, sourcing, and production – product will cost more but value for money will be high. Not sure that mega vendors like Authentic Brands Group are up to the challenge – but that opens the door for local upstarts all over the world.
While the discount market can carry on with “fast fashion” mass production overseas with all its ethics, carbon, and quality issues, but at least the product will be cheap. Those sellers will have to perform their own design and production, however. So it might not be SHEIN, but rather the likes of Zara, H&M, and Primark who could move faster than TJX to both put fresh merchandise out earlier and also potentially cut off supply to the clearance channel.
The off-price apparel market continues to thrive, especially with consumers concern over inflation. Even some affluent shoppers enjoy the treasure-hunt experience and a shift away from conspicuous consumption. There seems to be a lot of market opportunity for some of TJX’s brands, especially Sierra stores.
This is a strong plan…as long as inflation rages and people of most income levels are feeling strapped. Take those exogenous factors out of their calculation and suddenly you have expanded beyond where you should be.
Foreseeing an economic turnaround and consumer sentiment turnaround is mostly a fools errand, and as long as they can continue to stock their stores this is a good plan. If nothing else, they are signaling their bullishness on their business model, which is always a good thing.