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TJX Companies: Strong Results Demonstrate Value Was The Ticket This Past Holiday

Thomas Paulson
Mar 1, 2024
TJX Companies: Strong Results Demonstrate Value Was The Ticket This Past Holiday

The TJX Companies reported top- and bottom-line results that came in ahead of the company's own projections this week. This caps off an extremely successful last two years. As shown in the table below, comparable-stores sales are now up over +20% versus 2019.

For the quarter, Marmaxx (T.J. Maxx and Marshalls) delivered a +5% comparable-store sales increase; Placer traffic per venue was +6.5%, implying a slight decrease in the comparable ticket size, which is what we expected given consumers’ focus on value this past holiday season. HomeGoods produced a +7% comparable increase and Placer shows traffic per venue up +2.5%, thus implying an improvement in both the conversion rate and comparable ticket (likely driven by product mix, not apples-to-apples price increases).

Company-wide gross margins and cash generation were exceptional (+$473M, or +36% of sales, and $2.4B, respectively). In terms of the gross margin expansion (+230 basis points) the release reads, “This year-over-year increase was driven by a significant benefit from lower freight costs and lower inventory shrink expense, strong mark-on, and lower markdowns, partially offset by supply chain investments.” This is the first record of lower inventory shrink that we have read in several months. Should others also be making improvements on theft-shrink, that would be a significant positive turn for the retail industry and trade areas.

Additional comments from the company's earnings call:

  • TJX Companies CFO John Klinger said, “Shrink was an area that we were laser-focused on as an organization all year long. I want to recognize and thank all the associates who worked extremely hard on our initiatives throughout the year. Importantly, we managed our in-store initiatives while delivering a very strong top line and providing a pleasant shopping experience for our customers. We remain focused on shrink and continue to look for ways to improve this area going forward.”
  • TJX Companies CEO Ernie Herrman said, “We are confident that we gain market share in every geography that we operate in.” Marmaxx and HomeGoods “saw consistent performance across regions and income demographics.” “Each of our divisions continue to affect an outsized number of younger customers to its stores, attract an outsized number of younger customers to our stores...We have challenged the organization to try to increase visits (i.e., frequency)...I'm thrilled with what our marketing team has done on their creative for this coming year. We have some great creative and great messaging plans across each brand...We love the messaging where we're going out...We always talk about how we trade broadly...[W]e've talked about different income demographics. A really neat thing, I think, for everyone to remember is we are very balanced actually relative to the population of the United States we are balanced on age and income demographics in a very appropriate manner. We don't--as some retailers can--skew towards different categories, we actually are at the point now where we over-index in the age 18 to 34.” (A verifiable claim using Placer, as shown below.)
  • Herrman also noted, “Obviously, with the Macy's store closures, we do have a lot of overlap in categories that marry up, which marry up to the businesses that we run...I'm guessing an additional market share opportunity depending on the categories and the locations they're in. So not that we would get all of that, but we would get some of it is what we always figure. One indirect byproduct and I know you're not asking this, but I would like to mention to everyone on the call, one of the things that's happening with all the store closures is the importance to the vendor community keeps rising for our merchants amidst less brick-and-mortar competition, so to speak.”
  • Herrman, “It's been happening over a number of years now is the importance that our buyers are to the vendor community. And the way they handle the vendors in a very courteous manner, but straightforward is allowing them to continue to buy better season after season. And I think as we continue to gain market share and the vendors see that they're just being placed in our store and an eclectic mix with even more and more better brands has been an incentive for them to continue to want to work with our buyers even more so than in the past.”

TJX Companies outlook for 2024 was conservative, which is consistent with the company's style. Management expects 2%-3% comparable-sales growth, 45 net new Marmaxx stores, 40 new HomeGoods/HomeSense stores, and 26 new Sierra stores. An additional 480 stores are to be remodeled and 40 relocated.

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Thomas Paulson

Director of Research and Business Development,

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more. He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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