The TJX Cos. Inc. chief executive officer Ernie Herrman wants to capture additional market share around the world.
“We are convinced that significant market share opportunities remain across the U.S., Canada, Europe, and Australia over the long term. We see potential to further expand our store footprint by at least another 1,300-plus stores with our current retail banners in our existing countries,” Herrman told analysts on Wednesday during the off-pricer’s conference call on first quarter earnings results.
“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.
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Herrman explained that the company’s banners have a “wide customer demographic reach,” and its flexible and opportunistic buying allows it to offer expansive assortments across a good-better-best model across a broad range of income and age groups. He also said the company is targeting younger consumers, and have been successful in attracting new Gen Z and millennials shoppers, “which we believe bodes well for our future growth.” Herrman also noted that the off-pricer is seeing shoppers who have an annual household income range that is both above and below $100,000.
TJX operates more than 4,900 stores across nine countries under the banners T.J. Maxx, Marshalls, HomeGoods, Homesense and Sierra in the U.S.; Winners, HomeSense and Marshalls in Canada; TK Maxx and Homesense in Europe and TK Maxx in Australia.
Herrman said that availability of inventory isn’t a problem for TJX. “In fact, in recent years we have seen availability become even better as vendors look for additional ways to grow their businesses,” he said, adding that the company has opened thousands of new vendors. He said that has kept its store assortment fresh—they receive multiple deliveries each week— to fuel the treasure hunt shopping experience.
The CEO also said vendors like working with TJX because they deal with a buying team “that’s very straight forward” and a company “that has cash and will be paying.” And while there appears to be a promotional environment at retail, even with some retailers—such as Target Corp.—adjusting some ticket prices downward, Herrman said the categories where prices are being lowered are in certain commodity items and not the areas that would impact TJX’s assortment mix. But he did touch upon strategic pricing, noting that “we will not be undersold.” Buyers comparison shop weekly to see what the out-the-door prices are at other retailers for the same or similar items and making the necessary adjustments to make sure there is a price gap between them and the TJX banners.
For the first quarter ended May 4, net sales rose 5.9 percent to $12.48 billion from $11.78 billion. Consolidated comparable store sales rose 3 percent, on top of the 3 percent gain in the year-ago quarter. Net income jumped 20.1 percent to $1.07 billion, or 93 cents a diluted share, from $891 million, or 76 cents, in the same year-ago period. TJX bested Wall Street’s consensus expectations of diluted earnings per share (EPS) of 87 cents on revenue of $12.46 billion.
By division, U.S. Marmaxx—T.J. Maxx and Marshalls banners—sales rose 5 percent to nearly $7.8 billion, with comps up 2 percent. U.S. HomeGoods sales were up 6 percent to $2.08 billion, with comps rising 4 percent. TJX Canada net sales rose 7 percent to $1.11 billion, with comps up 2 percent, and TJX International sales were up 9 percent to $1.54 billion, with comps up 2 percent.
And while home goods have been soft at other retailers, executive vice president and CFO John Klinger said apparel and home categories at Marmaxx saw positive comp store sales, with home—a category that the off-pricer has increased its replenishment offerings—outperforming apparel. He noted that gross margin in the quarter was 30 percent, up 110 basis points in the quarter, driven by a benefit from lower freight costs and helped in part by supply chain investments.
Klinger also said the company is planning for shrink to be flat year-over-year. “But we still have a high focus on making sure that we balance protecting the goods with making sure that the customers can shop easily and get in be able to buy it while also maintaining safety in our stores,” he said. To meet that goal, Klinger said its loss prevention associates late last year began wearing body cameras, a de-escalation maneuver because “people are less likely to do something when they’re being videotaped.”
For the second quarter, the company expects consolidated comps at up 2 percent to 3 percent, and diluted earnings per share in the range of 88 cents to 90 cents. For the full year, consolidated comps were guided to the range of up 2 percent to 3 percent, and diluted EPS in the range of $4.03 to $4.09.
