TJX CEO: ‘We Mean More to Vendors Today Than We Did a Few Years Ago’

The owner of Marshalls and TJ Maxx is ready to turn other retailers’ misfortunes into market-share opportunities.

In a Nutshell: According to TJX president and CEO Ernie Herrman, “We mean more to vendors today than we did a few years ago,” he told Wall Street analysts on a call Wednesday after the off-price leader reported first-quarter earnings. In the wake of the pandemic, “the decrease in branded retail out there, whether it’s online or at brick-and-mortar, has created more of a reliance and partnership on the key brands in the market to want to do more business with us,” he added.

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TJX’s vendors are “loaded with merchandise,” according to the CEO, and know “we’re more important to them today than we’ve ever been. So that’s why we’re excited about the potential future increase in profitability as we move forward and continue top-line, market-share grab.”

He added that TJX has access to sufficient merchandise to support plans to add 1,400 global stores. More than 1,200 buyers sourced quality branded merchandise from 21,000 vendors last year. Some suppliers particularly appreciate the size, scale and buying power TJX brings to the table, Herrman said.

“As a growing global retailer with nearly 5000 stores, we offer vendors a very attractive way to grow their business and clear their excess inventory quickly and discreetly,” Herrman said.

TJX is in good shape for spring and summer, he said. Apparel and accessories did well in the quarter, while the home goods category is still finding its ways after outsize growth during stay-at-home restrictions.

Herrman believes inflation-wary, recession-minded shoppers will especially appreciate what TJX banners have to offer.

The HomeGoods owner has systems in place to take advantage of bankrupt Bed Bath & Beyond store closures and tweak inventory location by location to pounce on any market share opportunities. Canadian and European store closures present their own opportunities as well.

Like its many of its retail brethren, TJX is “laser focused” on cutting down on shrink. In addition to tagging and tethering high-risk products, Hermann said the company is looking for “newer ways to protect our merchandise.”

TJX raised its full-year guidance after beating Wall Street’s adjusted diluted earnings per share estimates. It’s not planning for an increase in crime-fueled shrink from the previous fiscal year, in contrast to Walmart’s move to close stores affected by theft and Target bracing for a financial hit from shoplifting.

As for trends at the start of the second quarter, Herrman said “traffic is starting to moderate a little bit” and that it’s struggling HomeGoods is showing early signs that it is “starting to rebound.”

TJX inventory totaled $6.4 billion at the end of the first quarter versus $7.0 billion a year ago, which product was stuck in clogged-up supply chains.

Thirty new locations left TJX with 4,865 doors at the end of the first quarter.

Net Sales: For the three months ended April 29, net sales rose 3.3 percent to $11.78 billion from $11.41 billion a year ago.

By division, U.S. sales at Marmaxx for its T.J. Maxx and Marshalls nameplates rose 7.2 percent to $7.37 billion from $6.87 billion, while HomeGoods slipped 3.4 percent to $1.97 billion from $2.04 billion. Marmaxx comparable sales rose 5 percent on top of the 3 percent gain a year ago, but fell 7 percent at HomeGoods on top of a 7 percent decline a year ago.

At TJX Canada, sales fell 4.1 percent to $1.04 billion from $1.08 billion. TJX International sales were essentially flat at $1.41 billion versus $1.42 billion a year ago.

Earnings: Net income jumped 51.8 percent to $891 million, or 76 cents a diluted share, from $587 million, or 49 cents, in the same year-ago quarter.

Wall Street was looking for adjusted diluted earnings per share (EPS) of 71 cents on revenue of $11.82 billion.

For the second quarter, the company expects a 2 to 3 percent increase in comparable store sales, and diluted EPS of 72 to 75 cents. That’s lower than the 79 cents analysts were looking for.

Fiscal 2024 guidance projects a 2 to 3 percent comparable store sales increase, and diluted EPS of $3.49 to $3.58. That’s up from initial projections of $3.39 to $3.51.

CEO’s Take: “We are pleased that the second quarter is off to a good start and we are seeing phenomenal off-price buying opportunities in the marketplace,” Herrman said. “Going forward, I am confident that we have significant opportunities to grow sales, drive customer traffic, capture market share, and improve the profitability of our company.”

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