Off-price giant TJX Cos. Inc. is still getting into its rhythm.
While the company’s 4,557 doors were closed for about a third of the second quarter, sales came back stronger than expected, but then fizzled more recently as the new normal settled in — and proved to be strange.
Second-quarter losses tallied $214 million, down from earnings of $759 million a year earlier — a nearly $1 billion swing that illustrates just how hard the off-pricer, which has a relatively small e-commerce operation, was hit by the coronavirus shutdown. The retailer — one of the largest apparel merchants in the world — has fortified its balance sheet during the crisis and has $6.6 billion in cash on hand.
The parent to T.J. Maxx and Marshalls saw sales fall 31.8 percent for the quarter ended Aug. 1 to $6.7 billion from $9.8 billion a year earlier. And the firm said its “open-only comp sales” — comparable-store sales adjusted to represent just when those were open — slipped 3 percent during the quarter.
But the company is planning for its open-only comp sales to fall 10 percent to 20 percent for the third quarter.
This plan projects trends over the past month or so and reflects the general uncertainty in the market and the big question marks that remain around the global pandemic and how consumers respond to it.
Although TJX is almost always conservative in its public projections — and is one of the very few companies offering any take on the future — investors were shaken and sent shares of the firm down 5.3 percent to $54.39 on Wednesday, still leaving the firm with a market capitalization of $65 billion.
The quarter also included some unusual hiccups for the usually smooth-running TJX.
Chief executive officer Ernie Herrman told analysts on a conference call: “As we reopened, we weren’t able to optimize the inventory flow back to our stores like we would in a normal environment. In addition to delays ramping our business back up, government reopening guidance caused some misalignment in the timing of when we reopened distribution centers and stores particularly in Canada. Further, our vendors and transportation providers were also ramping their businesses back up which caused some logistical delays with merchandise arriving to our distribution centers. We have put strategies in place to mitigate some of these inventory delays going forward although overall inventory was lighter than we would have liked, we were very happy with the productivity of our store inventory and our turns were very healthy.”
While TJX said there are still plenty of opportunities to pick up goods in the market, BMO analyst Simeon Siegel said inventories could continue to be lean in the fall.
“When retailers stopped placing orders, vendors stopped making product,” Siegel said. “There was this belief that the crisis would trigger excess inventory. The forced shutdown actually protected retailers from themselves, it forced them to have lean inventories.”
But he said TJX remains a powerhouse and will be well positioned to gain next year.
“COVID-19 has taught us that we know next to nothing,” Siegel said. “What we know with certainty is that the department store channel will shrink. Department store dislocation is exactly what TJ looks for. On the other side of the pandemic, TJ becomes more important to the dislocated department store shopper and even more important to the dislocated department store brands.”