With value in style and consumers of all types looking for absolutely lower prices, both TJX Companies and Ross Stores reported another set of strong quarters. TJX's Marmaxx (Marshalls and T.J. Maxx) delivered a comp-sales and a comp-transaction increase of +5% on a strong +6% increase in traffic per venue (Placer). Visitors per venue also increased +8%, with gains across all income groups. HomeGoods delivered a +2% comparable-store sales increase on a +3% increase in traffic per venue (Placer); sales were held back due to softer big-ticket furniture items (thus the difference between comparable-store sales and Placer traffic). Average dwell time was even to last year at Marmaxx. HomeGoods’ dwell time was down -1%. For off-price, we find that dwell time is positively correlated with comparable-store sales. Management is calling for comparable-store sales to increase 2%-3% in the second half of the year, or 100-200 basis points slower than the first half of the year (the slower rate reflects a lower international contribution).
TJX Companies CEO Ernie Herrman commented about its U.S. business: “The third quarter is off to a strong start, and we have numerous plans underway to drive traffic and sales. Availability of quality branded merchandise is excellent, and we are confident we will have an exciting assortment of fresh goods across all of our stores and online throughout the fall and holiday selling seasons...We have made our stores a year-round shopping destination for gifts and believe we are becoming more top of mind with shoppers with our consumable offerings. We believe that all of this will create an even more exciting shopping experience and encourage consumers to visit our stores more frequently...We want to sell everybody every day. And our marketing is lined up with that same, it's consistent with that strategy. So just to say, we haven't talked about the marketing as much, but when you watch our spots, whether it's HomeGoods or Marshalls or Maxx or Sierra, it is aimed at not being narrow. It is a wide audience that we're going after.” As shown in the table below for Marshall’s, the largest increases in visits during the week since 2019 have been days outside of Saturday. In other words, it has become more of an “any day of the week place to shop”.
Ross Stores delivered a 4% increase in comparable-store sales, driven by both ticket and transactions. Ticket was up due to selling more better and best brands. Cosmetics and children's were the strongest two categories. Ross Stores Chief Operating Officer Michael Hartshorn said of consumer shopping patterns, “Certainly, the events are more important. But as far as traffic during the quarter or during the week or during the weekends or towards events, we haven't seen a significant shift.” (i.e., the industry is experiencing greater seasonality).
Transactions were up due to higher traffic at dd's Discounts (+4% per location per Placer) and higher conversion at Ross Dress for Less (traffic per location increased +0.5%). California is Ross Dress for Less’ largest market (23% of trailing-twelve-month visits). As shown below, despite California being Ross’ largest and most mature market, it has consistently driven more growth in visits than the nationwide average over the past year.
Moreover, that outperformance has come despite substantial competitive encroachment by Burlington. Below, we show that cross-visitation to Burlington in California (for visitors making more than 2 visits) was up 10 points versus 2019, an increase of +34%.
On a nationwide basis, Ross visitors (making more than 2 visits) visiting a Burlington store is even more accentuated (+75%) as shown below.
Ross has undertaken a significant strategy to expand its customer base and capture more wallet share by offering more branded product--especially in better and best categories. To do so, they are expanding the vendor base and likely adding to the buying team. Ross Stores CEO Barbara Rentler noted, “We will have good, better, best brands in the assortment because we don't want to alienate any customer. So we want to make sure we still have a broad assortment of price points where we have a broad assortment of products in the stores. So we don't want to lose that because that's an important part of the treasure hunt.” This pushes Ross more directly in competition with department store customers. Dillard’s is the only department store that has gained on its share of Ross customers. (We’ve written frequently on Dillard’s the past two years). Ross just can’t put well known quality brands on its shelves and expect the merchandise to fly off the shelf; it needs to put disruptive value for those brands onto the shelves which results in a lower merchandise margin, but a higher average unit retail (AUR) and penny profit. (This is what we saw during Q2 2024: the strongest AUR in seven quarters, positive conversion rate, and +10% gross profit growth.)
Rentler also shared, “In terms of progress on the value strategy, the stronger value offering is definitely resonating with our customers. So in the fall season, we're going to continue to build on improving that value offering that we have out there now. And again, I just said it in my opening, the customer is really dealing with high cost in necessities. And I think the way for us to gain market share is really to continue down this value path.” (Of note, Ross is investing in price with merchandise margins down, and the plan is to go deeper with that in the second half of 2024. Recall that Walmart, Target, Amazon, and Costco are doing similarly.)
