tjx

In retail, it’s an off-pricer’s world — almost everyone else is just trying to sell in it.

Retailers and brands reporting quarterly results over the past two weeks showed signs of a renewed funk in the industry. The hopes of a rebound faded with 2018 and most stores are slogging through spring and crossing their fingers for the second half.

And while broadline merchants as diverse as Nordstrom Inc. and Kohl’s Corp. saw quarterly sales retreat in the neighborhood of 3 percent, the off-pricers continue to exist in their own expanding bubble.

TJX Cos. Inc. pushed revenues up 6.8 percent while Ross Stores Inc. moved ahead 5.8 percent. (Target Corp. has been showing strength, too, with its digital renaissance and registered 5 percent topline gains).

The divergence between the off-pricers and the full-price crowd mixed in with the U.S.-China trade war could drive the two groups even farther apart.

Michael Binetti, an analyst at Credit Suisse, said, “Given sluggish spring industry trends (as well as elevated inventories from brands rushing product over ahead of looming tariff threats), we think off-pricers like Ross will benefit from an abundance of inventory opportunities in the near term — and think the off-price group will be relative winners if tariffs hit, and likely drive broad-based inflation across the consumer’s entire basket of goods.”

Higher prices overall could lead consumers to turn to the off-pricers even more as they seek to bargain hunt.

And it might be TJX, home of T.J. Maxx and Marshalls, that is best positioned to grab share.

Ross struggled last quarter with its women’s business and has also pulled back on its inventory position versus a year ago. TJX has been out buying.

Simeon Siegel, an analyst at Instinet, noted, “TJX’s 16 percent inventory [increase] looks increasingly divergent from Ross’ 4 percent [decline], raising questions over Ross’ ability to perpetuate its positive comp [sales] run at the same time that it appears TJX continues to buy into strong branded offerings.”

Some of TJX’s inventory build was attributed to goods that are in transit or stock to fill new stores. But there also seem to be plenty of opportunities to pick up goods from other retailers.

Asked about inventories on a conference call last week, Scott Goldenberg, chief financial officer at TJX, said: “We were getting great buying opportunities in the marketplace. Some of the vendors likely had brought their inventories in a bit earlier, and it was available to us to take it with some very good buy.”

Quarterly Catch-up

It’s the off-pricers that are still winning in the market share rally with both
TJX and Ross standing out in the latest round of quarterly updates.
Company Revenues (in millions) Change EBITDA (in millions) Change Net Income (in millions) Change
TJX Cos. Inc. $9,278 6.8% $1,149 -0.3% $700 -2.3%
Ross Stores Inc. $3,797 5.8% $620 -0.4% $421 0.7%
Target Corp. $17,627 5.0% $1,779 6.4% $795 10.7%
Urban Outfitters Inc. $864 1.0% $69 -18.1% $33 -21.1%
Walmart Inc. $123,925 1.0% $7,659 -2.2% $3,842 80.0%
L Brands Inc. $2,629 0.1% $301 -0.7% $40 -16.0%
Macy’s Inc. $5,676 -0.4% $404 -15.7% $136 -2.2%
Ralph Lauren Corp. $1,506 -1.5% $148 -6.6% $32 -23.5%
Kohl’s Corp. $4,087 -2.9% $397 -12.4% $62 -17.3%
Nordstrom Inc. $3,443 -3.3% $242 -24.8% $37 -57.5%
J.C. Penney Co. Inc. $2,555 -4.3% $83 -46.1% -$154 vs. loss
Source: S&P Capital IQ, most recent quarter.
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