(Bloomberg) – TJX Cos., The owner of TJ Maxx and Marshalls chains, fell the most in more than four months after predicting that sales in open stores will drop as much as 20% in the current quarter, and doubt about its ability to lure discounted buyers back amid the pandemic.
The Framingham, Massachusetts-based company expects similar retail sales – a key metric for retailers – to decline by 10% to 20% at stores opening in the third quarter ending in late November. The results for the second quarter were hit by temporary closures for nearly one-third of the period, the company said. TJX has since reopened more than 4,500 stores in nine countries. See here for more details on the results.
Key Insights
TJX’s business model escapes e-commerce, and instead targets buyers looking for an in-store treasure hunt experience, a major disadvantage as Covid-19 cases in the US increase for a discount retailer like TJ Maxx, too much inventory from department stores and specialty clothing stores is crucial. The weeks during the Covid-19 shutdowns led to piles of clothing that many clothing retailers were unable to sell. TJX knows this, and notes that “overall availability of products on the market remains excellent.” The company said it has increased its purchases since “mid-July”. The bright spot was the HomeGoods decor chain, whose similar sales jumped 20% last quarter in stores that opened. “Lean inventory, market strength and HomeGoods’ 20% profit in open store is encouraging, but guidance for 3Q shows a material deceleration in sales, which is a concern,” said Bloomberg Intelligence analyst Poonam Goyal. Analysts have questioned whether consumers, who have moved away from discretionary items such as clothing in favor of buying groceries, would return to retailers such as Marshalls and TJ Maxx. TJX says shoppers are in fact returning and pinning that fact on “revised consumer demand.”
Market reaction
Shares fell as much as 7.6% in New York on Wednesday, the biggest intraday decline since April 1. TJX was down 5.9% through Tuesday.
(Updates share trade in last bullet)
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