Photos: HomeGoods
Is Flexibility The Key to TJX’s Success?
The TJX Companies, parent of HomeGoods, Marshalls and T.J. Maxx, exceeded its own expectations for the first quarter with a sales increase at the top of its forecast and earnings that came in well above the company’s plan.
Ernie Herrman, CEO and president of TJX, speaking yesterday on the company’s earnings call, said the results were “a testament to the strength and resiliency of our flexible off-price business model.”
Mr. Herrman praised the company’s buyers for finding “amazing deals in the marketplace” and its logistics organization for moving merchandise “to the right stores at the right time.”
TJX reported a three percent gain in net sales and same-store comps as more shoppers visited the off-price retailer’s stores in search of bargains. Marshalls and T.J. Maxx were particular standouts with traffic and same-store sales up in the mid-single digits.
Mr. Herrman and CFO John Klinger each expressed optimism that the company would continue to gain share as more consumers shopped at Marshalls and T.J. Maxx’s stores and online.
TJX also sees opportunities for its HomeGoods business to increase market share even as its first-quarter same-store sales fell seven percent against a 40 percent jump during the same period in 2022.
“We continue to see a terrific opportunity to capture additional share of the U.S. home market,” said Mr. Kinger. “In the first quarter, we opened our 900th HomeGoods store and continue to see excellent opportunities to grow both our HomeGoods and Homesense banners.”
Mr. Herrman said TJX’s banners have built-in advantages with low price points and treasure hunt shopping experiences.
“We see ourselves as leaders in flexibility,” he said. “The flexibility of our buying allows us to seek out the best opportunities and hottest trends in the marketplace. Our store formats and fixtures allow us to flex our floor space to support our opportunistic buying. Further, our systems and the flexibility of our supply chain allow us to merchandise stores individually with a curated mix of good, better and best brands with a wide span of price points.”
The TJX CEO said the company’s banners have successfully attracted “an outsized number of younger customers to our stores, including many Gen Z and millennial shoppers, which we believe bodes well for the future.”
TJX opened 24 new U.S. stores across its HomeGoods, Homesense, Marshalls, Sierra and T.J. Maxx banners in the first quarter.
Discussion Questions
DISCUSSION QUESTIONS: Is the TJX business model more flexible or less than its rivals? Are the company’s banners positioned to hold onto new customers it picks up when the economy improves?
Poll
Loading …BrainTrust
Ray Riley
Chief Executive Officer, Progress Retail
Susan O'Neal
General Manager, Promo Intel & Insights, Numerator
As its buying patterns are opportunistic, TJX is more flexible than other retailers. It can flex on trends, prices and the mix of products it sells. However, none of this would be possible without the extensive skill of its buyers who are extremely knowledgeable, well-connected, and operate at a fast-pace. They know their customers and what they want. In theory other off-price players also have such flexibility but without buying and operational flair it dos not translate into success – Nordstrom Rack is a prime example.
TJX is the juggernaut of the off-price market, and I can’t see any reason why their success can’t continue. Flexibility is certainly a key part of their success, but it’s only part of what makes this very well-oiled machine continue to roll along delivering quarter-after-quarter of strong results. TJX seems to do well when the economy is good and bad, and given the current state of the economy, the future looks bright for TJX.
First the lagging supply chain issues of last year, and now the tailwinds of rising interest rates and inflation, TJX broadly is simply in a great spot.
Flexibility, assortment and merchandising that delights are advantages in any “normal” environment. These basics are things they do well all of the time. Add to that an increase in deal-seeking consumers and behaviors and TJX is definitely sitting pretty.
The TJX model is definitely more flexible, as their major competitors don’t even sell online. The off-price, opportunistic buying model is such that color and size are not marked nor considered in the ticketing process. It is more of a bazaar type environment with less specificity of exactly what is being sold. Yes, this makes online shopping very difficult, but TJX seems to have mastered this as well.
TJX has taken flexibility and made it a business mantra that works. Giving buyers the flexibility to buy on one end and store managers the flexibility to merchandise effectively with their store space on the other end—this also supports effectively selling the treasure hunt fever to a younger audience.
Good point on the online aspect of TJX’s model. This enables greater buying flexibility as they can ship slow moving online inventory to stores to sell. TJX and the off-price category does well in good and bad economic times and seems recession-proof.
TJX is perfectly positioned to ebb and flow with the market when it comes to both inventory availability and demand. They’ve got flexibility to both buy the right inventory at the right time and to execute in store. They are the default retailer for value price treasure hunt shopping, so they can fulfill that promise across a broad range of products.
Flexibility is great, but the opportunity is really what is driving things right now.
Retailers like Target and Macy’s can only afford to chase a price-conscious consumer down so far without crushing its business. It’s like asking a tiger to change its stripes.
Instead, Target (for instance) will continue to buy limited quantities of discretionary apparel and home items, leaving a huge gap between itself and off-price.
All this opportunity is created at the buy.
At the heart of the TJX organization are talented, disciplined and intuitive merchants who know why they’re investing in every product sold in their channels and how they will position it to sell. With that reputation, they also attract well known brands which enhance the treasure hunt for customers. By creating a highly shoppable, well classified environment, customers of every type will find reasons to return.
TJX provides a great customer experience. Their flexibility and business model are the framework in which the individual stores offer shoppers time off from daily stress and opportunities to maximize their spending as needed. Unless TJX decides on a different trajectory, I think they will have continued success. Don’t you love it when a company exceeds its own expectations, while it exceeds the expectations of its customers!
The company is indeed flexible. When better forecasts made excess inventory more scarce, it started ordering its own direct from the brands. As soon as the pandemic peaked, it canceled all those outstanding orders, as it became apparent we were going to have a glut. That’s flexibility. How many of us could say we could pivot like that?
I have a friend who’s a broker. He asks me a lot about TJX. All I keep saying is “TJX always wins.”
The marriage of the treasure hunt experience in store, the feeling that you are always getting a good deal and the flexible buying process will always succeed when well executed. And TJX continues to excel on execution. They do a great job of managing opportunistic buys and getting the right mix of merchandise to the right brand at the right time. Their focus on a speedy and efficient check out and return process is a key component. They rarely disappoint a customer because most customers want a category of an item not the exact brand color and size when shopping in their stores.
Just like discovery is the opportunity for the TJX customers, discovery and opportunity are the mantra for the TJX buyers. They are not constrained by particular brands and filling specific SKUs. Their flexibility allows them to think like the customer rather than a structured operator.
That flexibility – and the thrill of the hunt – is what brings shoppers to TJX’s stores. It’s a take off on that old Marshall’s slogan: shoppers come to see the 1000s of items that arrive every week. It’s a good business model and one that has trained shoppers to visit the stores frequently or they could be missing out.
On all fronts, TJX is superbly positioned to retain and grow its customer base as (when) the economy rebounds. The brand is nimble, strategic and lightening-quick in adapting to shifting consumer needs – striking the perfect balance of a solid and stable core group of products while mixing in fresh new merchandise more often than their competitors.
The TJX flexible model is part of what it makes it interesting for customers. In addition to “deals,” you never know what is going to show up at one of the tJX stores. A tougher economy may mean that consumers look for deals, and that’s what TJX is known for. This is a chance to attract new customers. As the economy improves, it shouldn’t lose many new customers. Low prices are always in vogue, regardless of the economy. It’s up to TJX stores to deliver the good at the prices that are expected PLUS a positive customer experience.
This performance is a testament to TJX’s buyers and their agility in knowing what to buy, when to buy it, and what stores to place it in. TJX brands have cultivated the “treasure hunt” mentality with their customers to a point of near-obsession. This has given them an advantage over other off-price brands. Let’s face it, the entire off-price segment rose to stardom during the Great Recession and customers learned to love both the treasure hunt, and the value pricing – and they never looked back. Current economic conditions are approaching that value equation for consumers and this leaves TJX well-positioned for success. Other off-price brands should do well, too, but for some, they may struggle with the right merchandise mix and lack the treasure hunt mentality with their customers.
TJX touts its “flexibility” but (understandably) doesn’t share its secret formula, so it’s difficult to judge exactly how much its methods are differentiated from other off-pricers. So we can only evaluate its results, which are certainly exceptional.
The company has been in the off-price game since the early 1980s, when its former parent Zayre Corp. made a pointed reference in its annual report. (Yeah, it was my first published news story circa 1984.)
My gut tells me TJX dominance is as much about market power as it is about nimble methodology. They certainly were well-positioned to take advantage of the supply chain glut caused by the container ship debacle of 2021-22.
TJX absolutely has a more flexible business model than other retailers who forecast and order merchandise far in advance. During economic downturns TJX attracts new customers and I have no doubt that many will continue to patronize the stores when the economy improves because of the ‘treasure hunt’ aspect of shopping off-price, the wide variety of merchandise they carry and overall shopping experience they offer.
I guess if he’s calling his great buyers and analytics that help them ship the right product to the right stores “flexible,” then I’d agree. As a regular customer, I can say that the items available and the displays are much better than they used to be. Ten years ago, I’d cringe walking in to a TJMaxx. Today, I find it fun. They made TJX more like Marshall’s and from a customer’s perspective, that’s a good thing. Also, the assortment is excellent and the way it’s displayed is much better than it once was. My friends and kids love it too. I especially like HomeGoods and HomeSense. Keep up the flexibility! It’s working!
Yes, TJX is well positioned to continue to grow as the economy improves. With a multitude of so many store brands as well as retail positions within each store, TJX can just simply apply this winning formula to every new store as it grows.
In addition to the favorable macroeconomic factors, TJX’s success can be attributed to constant product assortment, a resilient supply chain, investments in data analytics, a soothing store experience, good supplier relationships, availability of multiple brands under one roof, and its GenZ-oriented new marketing strategy.