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MAXX POTENTIAL

Your mom’s favorite store is now America’s favorite store

REUTERS/Jessica Rinaldi
Still hot.
By Chase Purdy
Published Last updated This article is more than 2 years old.

While many traditional US retailers have been hurting the last several months, TJ Maxx parent company TJX Cos. has managed to escape the curse. The company’s fourth-quarter performance topped Wall Street’s expectations with a sales increase of 6%.

The quarter capped yet another year of revenue growth for the off-price retailer.

(That big spike you see in 1997 came in a busy year for acquisitions by TJX.)

TJ Maxx does well for several reasons, but three stand out:

Convenience

The typical TJ Maxx is located in a strip mall, ideally placed so that customers can do their grocery shopping and then meander next door to peruse the clothing and housewares on TJ Maxx’s racks. Compare that to a trip to a department store such as Macy’s, which usually involves committing to a mall experience.

Fresh inventory

And when shoppers do wander into TJ Maxx, there’s a good chance they will see styles and brands that weren’t there during a previous visit.

In 2015, net sales at TJX came to $31 billion. Macy’s brought in $27 billion, despite carrying about 50% more inventory. That means goods are coming through a typical TJ Maxx about twice as fast, Motley Fool analyst Adam Levine-Weinberg tells Quartz. ”They don’t have an every-year collection,” he says. “If you walk in and see something you like, you have to buy it now.”

If you walk in and see something you like, you have to buy it now.

Because so much merchandise is being sifting through so quickly, TJ Maxx can keep its selection up-to-date and quickly pounce on new trends. Goods move so fast that TJX CEO Ernie Herrman had a tough time giving investors an early view of average-item prices for the forthcoming second quarter during a recent earnings call. That’s because much of the merchandise hasn’t been purchased yet, whereas typical department stores sometimes order goods up to six months in advance, Levine-Weinberg says.

Protection from competitors

Another benefit for TJ Maxx: Nobody has figured out how to sell off-price clothing very well on the Internet. So while other retailers have had to scramble to figure out how to grow online sales to match consumers’ expectations and to stay competitive with e-commerce rivals, TJ Maxx has been fairly well shielded.

The company started its e-commerce operation in September 2013, so it does have a digital footprint, but online sales only account for about 1% of total sales, Levine-Weinberg said.

But if current trends tell us anything, it’s that online sales remain a major growth opportunity for bricks-and-mortar retailers.

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