TJX Cos. bets big on in-store shoppers, puts faith in merchandise buyers
Traditional retailers are in crisis, damaged by rapidly shifting consumer tastes, technological change and cut-throat price competition. And then there’s TJX Cos., which is defying gravity with the simple idea that under the right circumstances people still like to shop in stores.
The owner of T.J. Maxx and Marshalls has seen sales at stores open at least a year rise for 33 straight quarters. Its annual sales exceed those of Nordstrom Inc. and J.C. Penney Co. combined. The company’s market value is almost seven times that of Macy’s Inc., which was once the more valuable company.
TJX gets almost all its sales from its roughly 3,800 physical locations and plans to open 250 stores this year. Its revenue and profits are climbing and it envisions expanding to 5,600 stores worldwide over time.
The Framingham, Mass., company isn’t shifting business online or using big data to figure out what shoppers want. Instead, it has become one of the country’s fastest-growing retailers by sticking with a playbook from a vanishing era. It relies heavily on the instincts of its merchandise buyers, many of whom have been with the company for decades. TJX stores rapidly turn over limited quantities of products that are all sold at bargain prices. The result is a rarity in retail — a constant treasure hunt.
“Fresh merchandise hitting the floor is key,” said Paul Sweetenham, a former senior executive at TJX’s European division. “It’s a very simple business model, but it’s hard to execute.”
Little is known publicly about how the retailer executes its strategy, and TJX declined to make current executives available for interviews. The Wall Street Journal pieced together how the company operates from conversations with former executives and people familiar with its business practices. Debra McConnell, a TJX spokeswoman, confirmed some facts about its strategy.
TJX is known as an off-price retailer because it offers brand-name goods at 20% to 60% below regular retail prices. The company takes an average of 25 days to sell its merchandise, a quarter of the time it takes department stores like Macy’s and Kohl’s Corp. to sell their inventory, according to research from investment bank UBS.
“I like hunting for clothes,” said 18-year-old Bailey Mizell, who visits the T.J. Maxx near her home in Windsor, N.C., about once a week. “If you find something, then you feel like you’ve scored a deal.” One of her favorite purchases this year has been a $250 Calvin Klein peacoat that she bought for $80.
Traditional retailers are struggling as shoppers shift spending online and eschew brand loyalty in favor of low prices. Abercrombie & Fitch Co. is up for sale, J. Crew Group Inc. and Neiman Marcus Group Ltd. are struggling with heavy debt loads. Macy’s, Penney and Sears Holdings Corp. are closing hundreds of stores. Amazon.com Inc. on Tuesday announced a new service that lets its Prime members try on clothing before paying for what they choose to keep, an attempt to wrest market share from department stores and apparel retailers.
Off-price chains are not immune to these forces. Syms Corp., Filene’s Basement LLC and Daffy’s Inc. have gone out of business since 2011. Some lacked scale and lost out to larger rivals. Fashion retailer Loehmann’s, after going through bankruptcy proceedings, converted its business in 2014 to selling only online.
TJX, which emerged a winner in the sector’s earlier shakeout, in May surprised investors when it said sales at stores open at least a year rose 1% in the three months to April 29, versus a 7% increase in the year-ago period. Analysts, who had predicted an increase closer to 2%, attributed the shortfall to weak demand across the retail sector and the tough year-ago comparison.
“We’re approaching the end of the runway of easy growth for off-price chains,” said Steven Dennis, president of SageBerry Consulting LLC, a retail advisory firm.
Designer brands including Ralph Lauren Corp. and Coach Inc. are reducing shipments to off-price chains in efforts to protect their brand image. Department stores are also expanding their own off-price chains, such as Macy’s Backstage, Saks Off 5th and Nordstrom Rack.
TJX Chief Executive Ernie Herrman sees opportunities, not threats. On an earnings call last month he said a “disruption” in retailing is creating a glut of merchandise that TJX is scooping up at bargain prices. Products become available when department stores cancel orders or when companies manufacture too many items. Many big brands also make some merchandise for TJX, typically by recycling past seasons’ best-sellers.
“We’re actually having to hold ourselves back to ensure that we don’t buy too much too soon,” said Mr. Herrman. He joined the company in 1989 and rose through the merchandising ranks before becoming CEO in January 2016. Each of the company’s four CEOs came up through the buying ranks.
TJX’s roots date to the 1970s, when the…