Consumers have the power to spend, they’re just being choosier, boosting merchants online and favoring automobiles, home furnishings and fashion that promises big value for the price.
Those trends, which have reordered the apparel landscape in the last year, are still going strong, according to July sales figures from the government and earnings from off-price giant TJX Cos. Inc., which added $475 million to its topline in the second quarter.
The seasonally adjusted sales tally, which compares July with June, showed that department stores sales rose 1 percent, while specialty stores slipped 0.2 percent and total retail sales increased 0.6 percent.
Economist Chris Christopher, executive director, IHS Markit, said “consumers came out swinging in July after taking a breather in May and June.”
“This was a very good report, indicating that consumers remain an engine of U.S. economic growth,” Christopher said. “We expect consumer spending to be the primary driving force of GDP growth in the back half of 2017, supported by rising employment, real disposable incomes and household wealth. Income tax cuts in 2018 will likely fuel an acceleration in spending growth and a hike in the personal saving rate.”
But even though the July department store sales gains bear out what executives have been saying — that the market is gaining some momentum — it’s the off-pricers that continue to really gain in the brick-and-mortar world.
TJX’s second-quarter sales rose 6 percent to $8.36 billion from $7.88 billion with a 3 percent gain in comparable-store sales. Net earnings slipped 1.6 percent to $553 million from $562.2 million a year earlier. However, diluted earnings per share were helped by stock repurchases and inched up to 85 cents from 84 cents a year earlier, bringing EPS in 1 cent better than Wall Street projected.
Ernie Herrman, chief executive officer and president of TJX, told analysts on a conference call: “Customer traffic was the primary driver of our consolidated comp increase.…We remain convinced that we have been growing our customer base and gaining market share at each of our four major divisions. The customer is clearly telling us that bricks-and-mortar retail continues to be an essential part of the shopping experience, and certainly when it is executed right with the right values. All of this gives us confidence in our long-term global store growth potential. Across the company, we plan to open approximately 260 stores this year alone.”
TJX, which has 3,913 stores, is organized around Marmaxx, which includes T.J. Maxx and Marshalls, HomeGoods, TJX Canada and TJX International, which operates in Europe and Australia.
Herrman said there were plenty of opportunities to buy goods in the market, which has been characterized by continuing weakness at full-price retailers and mass store closures.
TJX is taking advantage of the turmoil in the market to build its base, and is also seeking to bring in young customers.
“We want to go after that customer base for the future, and [part] of the feedback that we get about our stores now is it’s like an entertaining type of experience and a treasure hunt and it’s become more of a cool place to shop, which is why I believe we’re having success going for the younger customer,” the ceo said.
For now, the off-pricer’s bag of tricks seems to be bottomless. TJX boosted its annual EPS outlook to a range of $3.89 to $3.93, up from the $3.82 to $3.89 previously projected.
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