Off-price giant TJX Cos. Inc. has taken one small step back to normality and agreed to its standard 60-day payment terms for vendors, according to sources.
After the coronavirus outbreak shook up business in the U.S., the retailer extended its terms and told the brands that fill its stores they would be paid later than usual, sources said.
“TJX was the first two weeks ago that put the brakes on,” said one source who deals with the retailer, noting the firm is now “resuming normal payment terms” for outstanding orders.
A request for comment to TJX was not returned on Friday.
The corporate parent of T.J. Maxx and Marshalls, TJX is one of the industry’s largest and strongest players and moved fast to protect its finances, drawing down $1 billion from its credit line and reducing expenses as it closed it stores — all steps that many other retailers have taken.
The massive company, with nearly $42 billion in annual sales, came into the crisis with $3.2 billion in cash and equivalents — a very strong positioning relatively, even if the off-pricer doesn’t have a large e-commerce business to fall back on with its store closed.
Off-price is a model that has taken massive market share over the past decade by relying on a steady stream of name-brand goods and sharp pricing to drive foot traffic to stores.
Another source said vendors pushed back on TJX’s efforts to create some more financial cushion while everyone in the industry is hurting with nearly all non-essential retail shutdown.
“People freaked out and all the vendors said, ‘No, this is insane,’ and they have really big vendors,” said the source.
When stores do start to reopen — as early as next month — the off-pricers, as large-volume players and clearing houses of excess goods, are expected to be an important part of the pricing dynamic in the industry.
Asked on Thursday about the promotional environment once stores do reopen, Emanuel Chirico, chairman and chief executive officer of PVH Corp., said: “A lot will depend on what the off-price promotional market looks like, about how aggressive we would have to be in order to clear goods. If it’s too aggressive, we will pack and hold core [merchandise] that doesn’t have a big seasonality to it.”
That practice — warehousing goods for next year — would be a change for full-price players.
“That model has been used extensively by the offprice channel, the T.J. [Maxx]s’ and the Ross’ and I think we’re going to have to take a lesson out of that and maybe have to park some inventory for a period of time,” he said. “Interest rates are very low, and we’ll take advantage of that as we go forward.”
But if PVH, parent to Tommy Hilfiger and Calvin Klein, and others were to stash away goods, they would also have to make less for spring for next year.
That would add up to less economic activity even as the world tries to dig itself out of what by all accounts is going to be a deep economic ditch.
In the U.S. alone, nearly 10 million people were added to the jobless rolls in just two weeks, a trend that’s expected to push unemployment up above 10 percent.
On Friday, the Labor Department said March unemployment rose 4.4 percent from 3.5 percent as 701,000 workers fell off payrolls in the official monthly tally, which is destined to grow rapidly this month.
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