TJX Cos’ (TJX) T.J Maxx and Marshalls continued to eat Macy’s (M) and other department stores’ lunch during the holiday season.
The off-price giant said on Wednesday that same-store sales rose 3% during the fourth quarter, beating Wall Street forecasts and certainly beating Macy’s and Dillard’s (ADDS) where they fell 2.7% and 6% respectively. It’s all the more remarkable given that TJX only gets 1% of sales online, compared to about 18% at Macy’s.
Off-price retailers like T.J. Maxx, Marshalls and Ross Stores (ROST) have been the single largest poacher of department stores’ business in recent years as bargain hungry shoppers have looked for higher end apparel brands at big discounts and avoided the second-rate malls that are home to too many department stores.
What’s more, the quicker inventory turn and the sense that an item on a rack might not be there the following week at a T.J. Maxx or a Marshalls has led to a boom in this area of retail and made such stores a rarity in the business: shoppers are coming to stores.
“We were particularly pleased that customer traffic was the primary driver of our comp increases at every major division,” CEO Ernie Herrman said in a statement. TJX also beat Wall Street’s earnings estimates.
As detailed in a new Coins2Day feature, the department stores are trying to adapt, with Macy’s going so far as to expand a T.J.Maxx-like chain called “Backstage.”
Macy’s CEO Terry Lundgren told investors earlier this week that the chain will speed up tests of new store formats, boost focus on private label brands (to 40% of sales, from 20%) and overhaul how it sells beauty.
“Looking at the continued challenges in the retail environment and changing consumer shopping behaviors, we know we must evolve our strategy and execute faster,” Lundgren said.
But he and his department store peers have a lot of catching up to do. TJX now operates 2,300 or so Marshalls and T.J. Maxx stores in North America and Herrman reiterated his belief that could eventually top 3,000 stores. Meanwhile, Macy’s is closing dozens of full service stores and only planning to open 30 or so Backstage locations this year. And total TJX company sales, which includes businesses in Canada and Europe, hit $33 billion last year, well above Macy’s $26 billion. To think a decade ago Macy’s was about twice as large.
