TJX
TJX Companies reported extremely strong sales and earnings growth. Its MarMaxx division produced a comparable-store sales of +8%--driven by transaction growth--which lifted earnings by +16% and trailing-twelve-month (TTM) sales-per-square-foot to $448. CEO Ernie Herrman stated “Clearly our terrific mix of branded, fashionable merchandise, and great values resonated with shoppers when they visited our stores.” The HomeGoods division returned to positive comparable-sales growth, lifting earnings and TTM sales-per-square-foot to $373. Companywide inventory turnover was an exceptional 5.5x (excluding packaway, we estimate that figure to more like 7x), which demonstrates that TJX’s merchants are in “chase mode” and that the stores are “fresh with newness.”
These dynamics position TJX for an extremely strong second half of 2023. Supporting that view is the company raised its outlook for the remainder of the year, including comparable-store sales growth of +3%-4% (a range that they are likely to exceed). Herrman noted, “Q3 is off to a very strong start, and we feel great about our plans for the remainder of the year. The marketplace is loaded with outstanding buying opportunities, and we are confident that we will continue to offer a terrific mix of brands and an outstanding assortment of gifts to our shoppers during the fall and holiday selling seasons.”
Looking at the dynamic between comparable-transactions and our visitation data, the consumer is again out in force and seeking deals at TJMaxx and Marshalls stores. This shows itself in traffic per venue accelerating to nearly +14% versus +3% last quarter. While a lot of that improvement was the comparison base (much easier), it also reflects the loosening of consumer purse strings. Target’s commentary on traffic versus sales in July (below) also matches this better beat of consumer shopping spending. TJX’s CFO John Klinger shared, “We were very pleased to see that both comparable-store sales growth and customer traffic improved sequentially each month of the quarter. As we expected, average ticket was down due to merchandise mix. The impact of the lower ticket on sales was largely offset by an increase in units, with shoppers putting more items into their cart...Marmaxx's apparel and home categories both saw high-single digit comp increases.”
On the home category and Bed Bath & Beyond's exit from the market, Herrman noted, “[It's] tough to measure, but we feel as though we are getting [visitors] from Bed Bath & Beyond but not just those guys. I believe we're getting some business from the online home retailers as well that have been a little inconsistent in their execution [likely calling out Wayfair and Overstock]. I think that just creates other opportunities...The other good thing is it creates additional supply of buying opportunities. We've been talking today about at the retail level, customers need another place to shop, but for our merchants, they get to take advantage of additional supplies and we mean even more now to certain vendors because now they have less places for them to sell their goods. So that's been equally I guess beneficial.” This is important context that we speak to below, as it relates to Target’s home business.
Ross Stores
Ross Stores also reported above-plan sales and earnings and lifted their outlook for the second half of the year. CEO Barbara Rentler saying, “We are pleased with our second-quarter results, with both sales and earnings well above our expectations. Along with easing inflationary pressures, customers responded well to our improved value offerings throughout our stores…Cosmetics and accessories were the strongest merchandise areas during the quarter, while performance across geographic areas was broad-based. Similar to Ross, dd's DISCOUNTS performance also improved due to better merchandise assortments and the aforementioned moderating inflation...Where is the customer on the journey? I think the customer with moderating inflation is feeling a little bit more room to spend money. But again, our customer is moderate- to low-income customers. They still face inflation in front of her because she has just the higher cost of the necessity she has to spend. I think on our journey with the customer in terms of better value and better values on the floor. It's a continual process, right? The customer votes and the merchants are out buying goods and responding to what she's voting on. In second quarter versus first quarter, I think the merchant team did a better job of offering her broader assortments and better values.”
Ross Inc’s comp-store sales increased +5% which lifted company-wide trailing-twelve-month sales-per-square-foot to $349. The interplay between comparable-transactions and our visitation data shows that Ross was able to recovery more of its conversion rate then it lost last year– a very favorable signal as we discussed above with TJX. Ross’ inventory turns (non-packaway) improved to a stunning 9.5x. (Success with “treasure hunt” retail is to foster the perception that the deals in the store are so compelling, that if the shopper doesn’t grab it now, it won’t be there on a return visit. 9.5x demonstrates that that this perception is working.) Rentler also noted, “Retailing is dynamic. I do believe that off-price has this unique opportunity because it carries lots of products, and it has the ability to flex based off of the customer and you're not kind of pigeonholed into one view of who you are, you can flex and move with what the customer wants. I think off-price is in the right place at the right time.” Ross is positioned to have a very strong second half of 2023.
