It was hard to find any shred of upbeat news in the apparel industry last week, when heavyweights Macy’s, Kohl’s, and Nordstrom all reported disappointing spring sales results.
But on Tuesday, the parent company of T.J. Maxx and Marshalls dropped a roaring first-quarter earnings report that showed no signs of the troubles engulfing its midprice clothing counterparts. TJX Cos. saw revenue increase 10 percent to $7.5 billion, and recorded a 7 percent increase in comparable sales, or sales at stores open more than a year. The retailer even raised its earnings forecast for the year based on how strong business was in the first quarter.
The results continue a hot streak for a company that has for over a year managed to avoid the general malaise at the mall. And its success offers some insight about what is — and isn’t — proving enticing to customers in the current shopping environment.
For starters, TJX’s strength is evidence that the recent woes of traditional retailers cannot simply be chalked up to the rise of online shopping. Marshalls has no e-commerce offering at all, nor does HomeGoods, another fast-growing TJX-owned chain. T.J. Maxx’s online operation only launched in 2013 and represents just a tiny sliver of its business, one that it does not include in the tabulation of comparable sales. That means the robust growth seen across the company is coming entirely from old-fashioned, brick-and-mortar retailing.
And it’s worth noting that in this quarter, like the last one, executives said the sales increase came not from selling pricier items, but from a surge in foot traffic to its stores.
There’s no doubt that Amazon.com is starting to make serious headway in cracking the fashion category, and shoppers are getting more comfortable buying apparel in the online channel. But T.J. Maxx, Marshalls, and HomeGoods offer hard-to-ignore evidence that customers are still plenty eager to shop in physical stores if the merchandise, price, and service are on point.
The booming sales at TJX also underscore the extent to which shoppers generally are embracing off-price shopping, with its promise of name brands at low prices and a treasure hunt-like shopping experience. A rival off-price retailer, Ross Stores, has also been on a tear, delivering an 8 percent increase in revenue and a 4 percent increase in comparable sales last year.
Consumers’ enthusiasm for off-price shopping is shaking up the clothing industry in a variety of ways. For one, it has shaped the business strategies for upscale department stores Saks Fifth Avenue and Nordstrom. These tony stores are increasingly reliant on their off-price outlets, Saks Off 5th and Nordstrom Rack, and they are putting more expansion muscle behind those concepts than they are their main department stores. At the beginning of 2014, there were 39 Saks Fifth Avenue stores in the United States and 72 Saks Off 5th stores. Today, there are 38 Saks department stores and 90 Saks Off 5th stores.
The mix of stores has been similarly changed at Nordstrom, which had 153 Rack stores two years ago and today has 200 of them.
Macy’s debuted an off-price outlet last year it calls Macy’s Backstage. It is testing both standalone stores and shop-in-shop set-ups in existing