Department stores are continuing to lose the market share game and off-price giant The TJX Cos. Inc. is running up the sales score.
The Census Bureau, in its monthly sales tally Tuesday, said October department store sales fell 7.3 percent from a year earlier as overall retail sales inched up 1 percent. That gave department stores a sales decline of 5.2 percent, to $118.5 billion, over the first 10 months of the year, even as total retail sales across the economy gained 2.8 percent with strong increases among e-commerce sites, health and personal care stores, building material and garden stores, car dealers and furniture stores.
While sales at department stores are being hurt as consumers shift spending away from apparel and toward other categories and experiences, there is still a fashion formula that’s working — just look at TJX, which is parent to Marshalls and TJ Maxx and has the brands, the prices and an increasing focus on fashion.
TJX said sales for the three months ended Oct. 29 increased to $8.29 billion from $7.75 billion. Comparable-store sales rose 5 percent, with Marmaxx, the U.S. division that houses Marshalls and TJ Maxx, in line with the company average as the U.S. HomeGoods business comped up 6 percent and TJX Canada jumped 8 percent.
TJX’s European and Australian unit lagged with flat comps. (TJX’s earnings fell 6.4 percent to $549.8 million, or 83 cents a diluted share, but factoring out a debt extinguishment charge and a pension settlement, the retailer’s adjusted earnings per share tallied 91 cents, topping the 87 cents analysts projected).
Department stores have sought to meet this challenge by moving quicker, by offering a more enticing shopping experience and by expanding or getting into their own off-price businesses, such as Saks Off 5th, Nordstrom Rack or Macy’s Backstage.
But store traffic remains a problem and TJX remains king of the off-price heap.
Ernie Herrman, chief executive officer and president of TJX, noted with particular pride in the company’s third-quarter update that the company’s 5 percent comp sales gain was “almost entirely driven by customer traffic.”
On a call with analysts, Herrman said: “We believe we have one of the widest demographics in retail, and that the depth of our buying organization is helping us attract customers of all ages. This includes Millennial shoppers as we are offering fashions in brands relevant to them.”
TJX has made itself important to players up and down the fashion supply chain. “We source from a universe of over 18,000 vendors in more than 100 countries. This is thousands more vendors and dozens more countries than a decade ago. We believe we are an increasingly attractive outlet for vendors. We operate almost 3,800 stores in nine countries, are opening new stores year after year and are selling a mix of branded merchandise. We are flexible and straightforward in our dealings and offer vendors many ways to grow their business.”
Craig Johnson, president of Customer Growth Partners, said, “Off-price is the big thing that’s hitting the department stores — that’s clearly the single biggest factor. That’s a real issue for them, the biggest source of their softness.”
He noted that department stores are also closing doors, with Sears Holdings Corp. and Macy’s shutting underperforming stores.
Johnson said the off-price sector, led by TJX, is also taking some share from the fast-fashion companies that have been generally soft in the U.S.
“From a style point of view, we think the market for that kind of [quick-turn fashion] has gone soft where kids…they’ve kind of moved on and are going to performance wear…[and] mainstream styles, the kind of stuff you might find at American Eagle and Hollister,” he said.
Hennes & Mauritz, however, is managing to grow overall as it works to reignite its U.S. business. The firm said its global sales in October increased by 10 percent in local currencies, as the company added 462 doors over the past year for a total base of 4,269 stores.