The department stores had their say last week — with Macy’s Inc., Kohl’s Corp., J.C. Penney Co. Inc. and Nordstrom Inc. all weighing in with second-quarter results that showed enough signs of improvement to cheer investors despite the mostly downward trend in sales.
Now it’s the increasingly fashion-savvy TJX Cos. Inc.’s turn to chime in with its own second-quarter story.
Analysts expect the company on Tuesday to post net second-quarter profits of $537.1 million, according to S&P Capital IQ. That would be a slight decline from the $549.3 million posted a year earlier, but earnings per share are expected to notch up modestly to 81 cents, with analysts expecting the company to beat its own projections calling for EPS of 77 cents to 79 cents.
It is the retailer’s sales growth that’s expected to wow, though. TJX’s revenues are projected to rise 6.5 percent to $7.84 billion and reinforce the trend that pushed the off-price giant past Macy’s in recent years, for total sales of $30.94 billion in 2015.
These are the types of results that have come to be expected from the Framingham, Mass.-based retailer, which operates most prominently under the TJ Maxx and Marshalls banners, and leads an off-price sector that also includes Ross Stores Inc., Burlington Coat Factory Warehouse Corp. and Nordstrom Inc.-owned Nordstrom Rack and Hudson’s Bay Co.-owned Saks Off 5th.
(The full second-quarter picture will become even clearer this week as Urban Outfitters Inc., L Brands Inc., Target Corp., Wal-Mart Stores Inc., Gap Inc. and others roll out results.)
The success of TJX has altered the company’s competitive/collaborator relationship with department stores. While the traditional model has off-price buyers out and about buying goods from full price stores to sell at cut-rate prices, sources say the company has grown over the years to also be an extremely important wholesale customer buying directly from the brands.
Shoppers, too, have come to see off-pricers in a different light. Last week, Moody’s Investors Service projected that off-price revenues would grow by 6 percent to 8 percent for the next five years — continuing to motor past the 2 percent to 4 percent growth seen for the broader apparel sector.
Moody’s sees the off-pricers grabbing roughly 10 percent of apparel sales by 2018, up from 8.8 percent.
“They are today’s department store,” said Simeon Siegel, an analyst at Nomura Securities. “It’s not a thrift shop, you’re not just getting cheap clothing, it’s that you’re getting expensive clothing cheap. Off-price works because people value brands, despite all the conversation around the challenges that brands themselves and department stores themselves are facing.”
Offpricers have come to shine both when the department store business is down and when it is up, but Siegel said they still need other players to help cast that halo over brands.
“Look at the vendors and brands like Michael Kors and Ralph Lauren, they’re not closing up shop,” the analyst said. “They’re saying they’ll be more restrictive to the department store channel…they’re trying to elevate the department store channel by reducing inventory [there].”
In the meantime, TJX is doing some of its own elevating, for instance with its designer-orientated section dubbed The Runway.
“It definitely seems like the off-price channel is being given greater license to purchase higher upstream and the stigma around shopping off-price seems to have fallen by the wayside meaningfully,” Siegel said.
The fashion changes at TJX are perhaps most apparent at the three-level, 40,000-square-foot Boston TJ Maxx store it opened in May at the corner of Newbury Street and Mass Avenue, across from an Urban Outfitters.
During a recent visit, the windows were full of midtier handbags. A greeter was positioned at the entrance, near a skin- and hair-care display that was significantly more comprehensive than is typical for the retailer.
Roughly 1,000 square feet in a windowed corner on the second floor was dedicated to designer styles in The Runway section.
In suburban locations, The Runway section typically houses labels like Rag & Bone or Vince, but in the Newbery Street store, it also housed higher-end designer apparel, shoes, sunglasses, scarves and bags.
The store had past-season designer pieces by Gucci, Alexander McQueen, Oscar de la Renta and Proenza Schouler, usually a single piece or two of a style. Sometimes items were a bit worse-for-wear (makeup stains, broken zippers.) A clearance carousel held pieces by Balenciaga, Viktor & Rolf and Moncler, along with more Gucci. A printed sign touted Derek Lam, although there didn’t appear to be any of the designer’s merchandise present.
For shoes, the door had about a dozen fairly recent styles of Saint Laurent, plus Tod’s, Dolce & Gabbana, Jimmy Choo, Valentino, Rene Caovilla, Chloé and Ferragamo. They had bags displayed on black nesting tables, including a Stella McCartney Falabella, Chloé Hudson styles and Proenza Schouler’s PS1 and bucket bag.